Friday, February 24, 2012


I recently read a full page newspaper ad paid for by Remortgage America detailing their plan for improving the economy. They want the US government to finance a 30 year mortgage at a fixed 1% interest rate, with interest only payments for the first two years, for every US citizen. You would be able to finance a new or existing primary residence with a $500,000.00 lifetime limit.
What they say this will do: It will cut the monthly mortgage payments for most citizens by at least $500 a month or $6,000.00 a year.
            It will increase home values by increasing demand.
It will keep people from losing their homes by decreasing monthly home mortgage payments
            It will increase annual government revenues by decreasing the mortgage interest deduction.
The costs of this program would be paid for by this increase in tax payments over the next ten to fifteen years- assuming that the increase in tax payments is not otherwise spent by Washington.
            This is a loan program, so the money will be repaid over time.
            Remortgage America says that this would cost around $14 trillion dollars

This does satisfy a desire to get the government to help us, not just help big business.
The mortgage loan process would have to be subcontracted to those already in that business. That way it would not take so long to gear up for the demand. Most people in that business would stay employed --otherwise, you would be putting a lot of people out of work.
It seems to answer the need to keep people, whose income has dropped, in their homes. It is likely to free up a large amount of money that currently goes to the monthly mortgage payment and this money is likely to be mostly spent, spurring the economy.
It will put a bottom on house prices in most places, if not increase house values.

But, $14 million dollars is quite a bit of money. The government has committed $11 trillion dollars for bailouts of corporations over the last few years, but only spent $3 trillion dollars so far, and some of that has been paid back. The refinancing of the estimated $100 million housing units in the US would take a number of years, so the $14 trillion dollars would be spent over time. Not all of those units could be purchased for $500,000 or less so the total number of units might be less than the 100 million. It would free up the money that is currently in investor portfolios as mortgage loan investments, much of which would be used to buy government bonds. Perhaps this plan could be realized financially.
This would put Washington in the business of holding the majority of its citizen’s mortgages. Many people would like to see the government taking a smaller role in people’s lives. This situation is not completely different from Fannie Mae and Freddie Mac, etc., and many people want to privatize those organizations. It does seem like it would be a hard sell in the current election environment. It would be very difficult to do politically, but something is needed to jump start the economy. Something needs to be done that would affect a large number of tax payers, not just a small number of large corporations.

-Neil Fisher

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