<p>"We have auctions on a large scale already in Cal.</p>
<p>What would happen is instead of a buyer paying 6% on a mortgage, he would pay 4.5 to 5% and the government would pay the difference.</p>
<p>The banks would make money. Home prices would stabilize.
The debt outstanding would stabalize.</p>
<p>You wouldn’t necesssarily have to use auctions. A seller sells his house, just like now. It’s just that the government subsidizes the new mortgage. </p>
<p>The government would phase out the program over a period of years.</p>
<p>It’s a program where banks could become confident that home prices won’t fall anymore so they can lend again.</p>
<p>To stop another bubble from occuring,
the government has to phase out the program if home prices start rising."</p>
<p>Not fair enough. An existing homeowner here who has not miss a payment or refinanced to get a load of cash, and I’ll be really ticked off that someone would get a better loan just because they were stupid to overstretch themselves. I demand low rates for us, too!!!</p>
<p>(I do agree, this does sounds like a better plan. If they include folks like me to get the share of the pie)</p>
<p>Unfortunately many of foreclosed homes in California are in farflung crappy areas nobody really wanted to live in. Now with a lower price they might be attractive to some but most are way out in the boonies. At least gas is now cheaper.</p>
<p>Renters get a chance to buy at lower prices with cheap money. Deal of a lifetime.</p>
<p>Technically there is little difference between a re-fi and a purchase loan. The only thing missing is the sale contract and marketing results.(other offers, etc)</p>
<p>Could I sell my home to my kid and co-sign the loan allowing her to get the 4.5 mortgage. I would have an attorney complete a life time tenancy for me and my wife to stay in the home.
Am I off base? Any pitfalls? D is an only child so no problem with her getting my assets. It would just be sooner than later.</p>
<p>I suggest you talk to a real Estate attny/ estate planner about that. I don’t know if Fanny allows co-signs. Those loans- Fanny/ Freddy were historically always the hardest to qualify for. If this new program goes through I can’t imagine them easing qualification requirements[ 20% down, etc. ] Do you have more than 500 K in equity on the house? If so, under current law, you would end up paying capital gains on any equity above $500k,[ $250 if you are single] whereas if you just leave the house to your D your estate may not have to pay any estate taxes.</p>
<p>I do not have 500k in equity- about 200k. I would “sell” the house to my daughter for fair market. I have perfect credit so I could co-sign the loan. She could apply for a $200k mortgage on a home valued about $400k. If I could just apply for the 4.5% mortgage I would not try this move. I also would not hide what I was doing- would all be above board. The idea is to take advantage of this government subsidized low rate. I would have an attorney handle the necessary paper work on the sale and life time tenancy. Quickly running the numbers I could cut my monthly mortgage payment substantially and pull cash out. The downside is I extend my payment out 30 years but with such a low mortgage rate the cost after inflation is almost zero. I believe inflation will run above 3.5% on average over the next 30 years</p>
<p>The problem with bailouts and giveaways is that sharp people like the folks here then try to legally game the system. All we are doing is artificially propping up the prices without addressing declining incomes. That doesn’t work in the long run unless the application of steroids continues forever and in increasing doses.</p>
<p>Lower mortgage rates… potential for higher prices.</p>
<p>Higher prices… both lenders and borrowers end up in better shape.</p>
<p>Investors are willing to lend the US government money at interest rates below 3% for the 10 year and below 4% :eek: for the 30 year bond.</p>
<p>The US government should borrow as much as it can at those rates and then lend that money at higher rates. </p>
<p>The US government will make money.</p>
<p>The real estate market will firm up.</p>
<p>Loans will be worth more.</p>
<p>The problem… rates can’t shoot up or we are back to square one. A strong possibility, but with government rates this low… if I was the government I would sell a couple of trillion more in bonds. </p>
<p>After all, the government has its hand on the printing press.</p>
<p>BCEagle- there is no doubt that I will try to legally game the system so in that regard you are correct. I have to tell you though without government and gaming the system the money made on Wall Street and in so much of the free market capitalist system would be be severely reduced.</p>
<p>“Unfortunately many of foreclosed homes in California are in farflung crappy areas nobody really wanted to live in.”</p>
<p>Barrons - Stockton and San Francisco are just a few miles apart. How different can they be? (jk - I’ve been to Stockton and I’ve been to Lynchburg, and frankly I prefer Lynchburg.)</p>
<p>tom - I’d prefer to think of it as “working within the rules” or perhaps “prudent planning.” I reserve “gaming the system” for the kinds of decisions that got us into the credit crisis in the first place. JMHO of course.</p>