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Obama’s Housing Plan – Stopping the Foreclosure rate

The President’s housing plan could not have been announced at a better time. Obama’s stimulus plan was just signed into law and the stock market fell close to its lowest point in over 6 and a half years!  The Fed also said the unemployment rate could jump to as high as 8.8% in the next year.   We need more from the administration to fix the worst financial crisis in nearly 80 years.

Many questions still surround the announcement of the plan.  Is the housing plan the additional boost we need?  Will it allocate enough money to truly fix the foreclosure rate?  Will this three-part plan really save close to 9 million American homeowners?

What Obama’s Housing Plan Does

  • Makes it easier to refinance: the plan changes the guidelines that used to give people only 80% of the home’s value; the new plan now gives people the ability to borrow up to 105% of their home’s value.
  • Gives the lenders reason to modify the loans: the government will take on part of the loss the lenders would face if they refinanced. This will affect the home owner’s debt to income ratio. The goal is to get this ratio to below 31%, with the government paying part of the difference.
  • Maintains Credit Flow: the treasury and Federal Reserve will continue to buy mortgage backed securities. This will maintain liquidity, ultimately freeing up capital and credit.

The short and long term objectives of this housing plan seem clear.  Bringing down the interest rates of mortgages through loan modification will put more money in the hands of millions of consumers.  Given this governmental aide, it is important that the citizens of America acknowledge that we too play a role in the solution.  This is where our President called on us to change our ways.  This is why he said “the party is over.”

We have to take it upon ourselves to be sure that we are smarter with how we now use the money we save from the mortgages.  Yes, people will buy more with the extra money, activity that we need to boost our economy.  Hopefully they will have learned from past mistakes and will begin to put the money away.  We need to change our ways a as whole.  This in turn will also help our economy get back on its feet.

Hello World!

So it all begins for me with this first post. I started this blog as a way to express my opinions regarding the current credit and financial crisis America and the world is facing. I created this blog as a way to share my experience, knowledge, and ideas about the credit and financial climate we live in today. I want to make sure the same practices that doomed this past decade are not repeated. I want to do my part in preventing people from falling victim to similar actions, as this will prevent our country’s economy from making positive changes.

Before I get into more detail about America’s financial crisis, it is important for you to know a bit more about me. My experience over the past 8 years has involved working in the banking, mortgage, lending, and credit industries. I earned my Bachelor of Science in International Business, as my passion has always been studying economics on an international level. I spent time living abroad in countries throughout Asia, as I knew that immersing myself in the economies I study is the best way to learn about them.

I am hopeful that the new President and his plan will be the first step towards bringing the American economy back to life; however, I am cautious, as the worse is still to come. Our country faces a long road ahead. The best way to move forward down this road is to make sure we don’t repeat yesterday’s mistakes.

Eight years ago, we thought we saw the American economy fall to its lowest after the tragic events of 9-11. In the short time since those tragic events, we have watched America rise up, thanks to the housing boom years—only to fall once again to where we are today. Our economy is the worst than it has been in over 70 years.

Working in these lending and mortgage industries, I have personally seen the lending and mortgage mess unfold. Can we get out of this mess? I believe so. I agree with President Obama’s infamous motto: “Yes We Can.” To see positive change take effect requires the effort of everyone in this country. I believe in America, I believe in who we are, and I believe that when things get tough, we only grow tougher.

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