Austin Real Estate Blog

With the economy’s health in turmoil and the housing industry teetering, homeowners throughout the country are questioning whether they will be able to maintain their mortgages or be forced to foreclose. For many who have neither the money to save their homes nor the ability to change their situation, the latter seems inevitable with no room for hope. At least it did until late January when the Senate Banking Committee, led by Senator Chris Dodd of Connecticut, proposed a plan that would enable homeowners to refinance their homes and switch to government-backed, fixed-rate mortgages.

The effort would be a part of the economic stimulus bill, which already includes the insertion of several hundred billion dollars into the economy via tax cuts, rebates and incentives. The banking committee’s addition would require a minimum of $20 billion. $10 billion would be used to purchase mortgage loans from struggling lenders, at a significant discount. This would enable the government to take over the mortgages and create fixed-rate 30-year ones for the homeowners. The rest of the funds would be used to purchase foreclosed houses. The structures would be refinished and resold or rented, or demolished. This would remove the abandoned, dilapidated buildings in many neighborhoods that are currently weakening the housing market.

If Senate Banking Committee’s plan is incorporated into the stimulus bill, homeowners could breathe a small sigh of relief. They could, in short, stop worrying that their homes were moments from being lost - their shelter moments from disappearing. Moreover, the economy could find a glimmer of hope as one portion of it, the housing portion, was revitalized.