Can This Federal Bailout Help Home Owners And Home Buyers?
All lookers are on Wall Street to see if the rescue plan will lead to more home mortgage lending.
The federal government came to the help of Wall Street financial services companies in early October with the nation’s most ambitious ever private rescue. But will the Wall Street companies use those funds to loosen up bank lending to home buyers?
“That’s the big question,” says NAR First Vice President Ronald Phipps. “The money that is being provided by the rescue needs to refresh the banks’ reservoirs to recharge housing. If it just goes into banks’ capital reserves to insure against margin calls, then it won’t have the intended effect.”
With this new federal bailout, called the Emergency Economic Stabilization Act, the U.S. Treasury is authorized to spend up to $250 billion right now to purchase mortgage-backed loans and other investments that have a increased chance for default. The other 450 billion dollars in funding is available on a much more restricted basis.
As investors turned on these high risk investments, Wall Street firms have been able to move the securities for only pennies on the dollar. Now, with the Treasury preparing to purchase, values for the securities could firm up. Should that happen, global investors might once again be willing to buy American mortgage-backed securities, helping to rebuild cash flow to investors.
“It’s the middle-income buyers that are hurt,” says George Wonica, vice chair of NAR’s Conventional Finance and Lending Committee. “High-earning households buying with large jumbo loans can still get their financing, although they probably will have to pay higher rates. Buyers willing to meet the requirements can still obtain FHA loans.”
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Author Eric Nichols is Realtor and Internet Home Marketing Trainer for Keller Williams Real Estate Professionals In Pittsburgh Pa. Visit Us At www.SearchPittsburghHomes.com For Additional Information About Buying And Selling A Home In Pittsburgh Pa.
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