The U.S. Government Reveals Plans to Tackle Foreclosure Homes Issues

According to the plan that is designed to address the existing problems the U.S. Government’s involvement in the housing industry will be reduced to a minimum. The plan also contains conditions pursuant to which certain limitations will be imposed on the amount of loans that will be backed by government sponsored entities Freddie Mac and Fannie Mae. This diminished role of the U.S. Government also means that more of the private capital will be entering the housing market.

Another resolution that is contained in the plan is to provide equal share of market responsibility to the government sponsored entities of the mortgage industry and the private sector which mean reduction of the mortgage portfolios that are being handled by Fannie Mae and Freddie Mac. According to some estimates, the entire mortgage industry is almost wholly supported by the government and the offered plan is specifically designed to change it.

There are different points of view though regarding the proposed plan. Some housing and financial analysts say that the plan will most likely raise the rates and the costs of borrowing for consumers. This factor will make consumers even more cautious and reluctant to enter the homeownership market. There is an opinion that there is a need for a growing number of homebuyers in order to reduce the number of foreclosed homes and, if the rates and costs of borrowing increase, than these homebuyers might change their mind and end up staying away from the market altogether. If this happens, analysts are saying that number of the foreclosed homes will increase which in turn will trigger further price reductions. The analysts also identified another point in the proposed plan such as privatization of the home financing system and limitation of the Feds involvement to just backing of Federal Housing Administration programs. There are also other efforts that target low and middle income borrowers.

 It is estimated by the U.S. Government that in the current economic environment when the number of foreclosed homes still at almost record highs the proposed plan might take seven to ten years before it can be fully and successfully implemented producing tangible and desired results.

What does this mean for you?  Adjusted for inflation, the value of your home (in dollars – your home has other value for you as well) is not likely to increase like you have been used to.  It may be less expensive to rent than it is to buy, and the pressure to buy is reduced.  There are no big price increases to contend with.  Thus if you don’t buy today, the price may well be the same tomorrow.

The kicker?  INFLATION.  The government says we have none.  Yet we know that food, fuel and clothing prices are going up and up.  If inflation kicks in, then real estate will follow it up.

Best advice: Think before you buy. Remember, it is easier to keep you out of trouble than it is to get you out of trouble. 
Call Mark Brifman first. 818.920.2113.