Jim Hickey press release: Hickey proposal on fixing the housing market with common sense solutions
The following is a press release issued by 11th Congressional District candidate Jim Hickey:
"Jim Hickey has more experience than either of his opponents in this subject, since he has been a licensed mortgage originator, and a licensed Realtor for over a decade. The stimulus and bailout did not work, and my opponent voted for stimulus. I would have never voted for the trickle down stimulus package. “Until all of the foreclosures are cleansed through the system, the market will not recover,” Hickey stated.
Hickey’s plan has a three steps, FHA guidelines, underwater homeowners, and modifications.
First of all, we need to reform FHA guidelines.
A) Change the holding period: Millions of Homeowners that faced a foreclosure, short sale or Bankruptcy currently have to wait 3-4 years before they are ALLOWED to purchase a home. I propose that if they have SAVED a downpayment, Can Prove income with Tax Returns and Paystubs, we should allow them to purchase these foreclosed homes on the market! (No Waiting Period).
B) We need to bring FHA back to the pre-internet, pre-boom standards. This was when a person did not need a credit score to obtain a loan, but instead needed to be approved using strict income requirements to qualify. The thinking behind this is if a person can qualify for a loan using the 31%/43% ratios, the risk associated with the loan is low. Since 31% of the income is used for the housing debt, and a total of 43% of income for housing and all other debts. Most conventional loans allowed borrowers to take out a loan without any income requirements (Stated Loans) or up to 60% of their income. Even today many conventional lenders still allow up to 50% of income. Meaning if a person makes $60,000 a year or $5,000 a month, some lenders will allow the housing payment to be $2,500 ($5,000 x 50%). Under FHA strict guidelines, the housing payment could only be $1,550 ($5,000 x 31%), and total bills could be a maximum of $2,150 ($5,000 x 43%). This makes sense, and we should continue it.
Next, we need to help the millions of homeowners that are underwater.
Millions of homeowners are currently underwater meaning they owe more money then the house currently appraises for. Many of these homeowners have paid their mortgage payments on-time, and cannot sell their home without having to spend a considerable amount of money out of their pocket. I propose that the banks lower the outstanding loan balance to the current appraised value at the current historic low interest rates, this will cause hundreds of dollars a month in cash flows. For doing this the bank and homeowner become 50/50 partners on future appreciation of the home above new outstanding balance.The banks risk will be lowered since the homeowner’s payments will be lower. If the bank had to sell the property at a foreclosure sale, they would get much less then the appraised value. Plus the banks will have a “silent lien” on the property, so the debt will be paid back in the future. This will greatly help the economy recover!
Here are examples of a homeowner that owes $300,000 on a home that only appraises for $200,000. The monthly payment is only Principal and Interest, no taxes or insurance included.
Current situation: $300,000 Loan, 6% Interest, 30 Year Term = Monthly Payment of $ 1800
New situation: $200,000 Loan, 3% Interest, 30 Year Term = Monthly Payment of $ 843
New Monthly Savings: $ 957
This savings will help all Americans, regardless if they are Democrat, Republican, Independent or Tea Party.
Lastly we need to help Current Homeowners with Modification. The government's modification program is a JOKE! I personally tried to modify my loans when my business closed down, and after sending and sending material. Nothing ever happened! We need to eliminate the bank's benefit to holding a home until foreclosure. We need to do the same as I have described above for Underwater homeowners, reduce principal, reduce interest to current historic lows, and create new mortgage on credit report.
Also if the lower payments still do not work for the borrower, we could amortize the loan over 100 years, causing payments to be $526 a month ($200,000 Loan, 3%) compared to $ 842 a month 30 year fixed. This is a 38% less of a payment, with nearly no principal being paid, but the family is able to remain living there, and the housing market can recover.
I have more information, as well as a video on this topic on my website, www.JimHickeyForAmerica.com. You might not agree with my solutions, but I am at least offering a solution to our problems. If you have a better idea, please let me know.