According to Medical Researchers, The Obama Plan Won’t Cure The Economy

Given the state of our current economy, everyone is looking and hoping for relief. President Obama has put together a plan to return the United States to a healthy economic status. However, medical researchers contend that no disease ever identified has ever been completely eradicated. Will the Obama plan be a miraculous ‘cure’ for what currently ails us? Let’s take a look at what it includes.

The whole process of getting a mortgage is significantly more complicated and difficult than it was just a few short years ago. It used to be that pretty much anyone that was breathing and could sign their name could qualify for a home loan. That is part of the problem that has led us to our current situation; many people were buying more home than they really should have been (if they even should have been able to qualify to buy a home at all).

Today you must have excellent credit to even be considered for a loan, as well as be willing to put a certain amount of money down if you want to buy a home. No more sub-prime loans or loans that are above and beyond the appraised value of the home. And when you say that you make a certain amount of income every year, you had better be able to prove it. No more liar loans.

If you are looking to buy a home and you pass all these criteria, you are in luck, because home prices have fallen so far in the past couple of years that they are now at incredibly reasonable levels, making them very affordable and very attractive. Part of the Obama plan is to give incentives to first time home buyers to try to get them to buy up some of this housing inventory that is continuing to pressure prices downward. With such low prices plus an $8,000 government tax credit incentive, it seems that the downward movement has stopped and the ‘treatment’ is starting to work on the patient.

For those people who are already in a mortgage but are having difficulty making the payments, the Obama plan includes “Making Home Affordable” which will allow for modifications to existing mortgages. The idea is to be able to bring rates down to as low as 4% to help people afford the payments and thereby remain in their homes and not simply walk away from them, adding to the foreclosure problem. Participating banks must bring the existing rate down to a point where no more than 38% of a homeowners net monthly income is used to pay the mortgage.

In order to qualify for the Making Home Affordable program a borrower must already have some late payments on their mortgage. Usually they will not consider a candidate unless they are at least 60 days late. In addition, the program is only available for primary residences. In other words, if you have a rental property that you are struggling with, this program will not be of any help to you. Finally, the loan must be either a Fannie Mae or Freddie Mac product. To find out if yours is, you can go to the respective websites and input your home address.

Another benefit to the plan is that if your home value has dropped so much that you Loan to Value is now greater than 80%, you would normally need to have mortgage insurance on any new loan you get. Under this plan, as long as you didn’t have mortgage insurance when you got your existing loan, you won’t need to have it on a refinanced mortgage. In fact, you can even borrow up to 105% of the current value of your home. This is very helpful to many people who have seen serious declines in the equity in their homes.

Is the Obama plan going to buck the medical trend by being a complete cure for the economy? No. No one knows how much it will help, but everyone is certain the points outlined above are only part of the solution. There is a lot of information available regarding the details of his plan, and now that it’s been underway for a bit of time we may be starting to see some of the affects of it on the general markets. Only time will tell if, and how much, of an effect these measures will have. In the meantime, it is giving hope to a lot of homeowners who are in very difficult positions right now.

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rsmallory 7 years ago from Central Texas

Great Hub! Well written and full of good information. Thanks.

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