America's "One-Year Mortgage Holiday 7 Point Economic Recovery & Jobs Plan"
ForConsideration of Our Nation's Citizens
America is currently facing unprecedented financial and economic challenges that, if not seriously and wisely addressed now, will have a profound negative economic impact on all Americans, plunging our nation and the rest of the world's economy into a long and deep depression. We should not view a prudent economic stimulus and recovery or rescue plan in a negative, cynical light, as a "bailout." Instead the plan should be viewed in a positive, practical manner, because it is a plan that will immediately restore financial and economic confidence and stability.
The following 7 proposals should be adopted:
1. A One-Year Mortgage Holiday. Congress should immediately re-allocate the approved and appropriated balance of the unspent $787 billion of Economic Stimulus money, the balance of TARP money and, with the coordinated cooperation of the Federal Reserve, also re-allocate the Fed's Quantitative Easing funds more fairly and wisely toward this Mortgage Holiday Plan. This prudent re-allocation of the taxpayers’ funds will actually work to jumpstart the economy, create millions of new jobs and stimulate economic growth. Congress should declare a national mortgage holiday for one year. During such year there would be a moratorium on the monthly or other periodic mortgage payments on all residential, commercial, industrial ;and farm loans. All foreclosures would stop. The Government would pay to the lender an estimated, average interest-only monthly payment (not to exceed 4%). Then, after the one-year "Time Out," the regular monthly mortgage payments would resume as normal with the original mortgage term simply being one year longer; a 25-year mortgage simply becomes a 26-year mortgage. No balloon payments would be due until a year after the end of the moratorium. Borrowers who do not need relief could elect to opt out. This one-year "Time Out" from mortgage payments will instantly empower millions of American families and businesses to divert their monthly mortgage payment money directly into their own personal & business pockets to save, invest, spend or reduce other personal and business debt, as well as paying down or off credit card debt.
If a borrower owning rental property participated in the moratorium for the mortgage on rental property, the tenants would get one year of 25% to 50% reduction in monthly renters' relief, to be negotiated between individual owners and renters, on a specially designed renters' relief program, so that up to 50% of the relief the property owner receives would be passed through to the tenants of the property. Retail and office tenants could also participate in 25% to 50% monthly rent relief, to be negotiated between individual landlords and tenants, if their landlords choose to opt in to the One-Year Mortgage Holiday Plan. Renters of residential, retail and office space whose landlords choose not to participate in the One-Year Mortgage Holiday Plan will, in any event, receive from the Federal Government at least a guaranteed minimum 38% monthly rebate of their base rent during the Mortgage Holiday time period.
Assuming there is an estimated current $12 trillion of total mortgage real estate debt in the nation, with approximately 80% representing residential debt and the remaining 20% made up of farms and commercial debt, applying a 4% annual interest rate would equal approximately $480 billion ($12 trillion x 4% = $480 billion / 12 = $40 billion monthly) of Government taxpayer expense to reimburse all mortgage lenders the interest portion of mortgage debt for one year. However, it is likely many borrowers who do not need relief would elect not to participate.
If American families' and businesses' regular monthly mortgage payments (rough guesstimate of $100 billion monthly) are infused directly back into the economy, there would be a huge economic stimulus for the country. WOW, now that's real, positive job-creating stimulus, to quickly jumpstart America's economy.
A new Government commercial mortgage-backed security (GCMBS) loan program should also be made available. This GCMBS loan program would unfreeze the current commercial credit markets to make affordable refinancing easily available for all the existing retail, office, restaurant, industrial, hotel, farm, apartment and miscellaneous commercial real estate loans coming due or that wish to refinance early. The Federal Government would guarantee the GCMBS loans; a portion of the interest paid on such loans would be paid to the Federal Government to offset part of the cost of the guaranty. Such a program is badly needed to make long-term financing available and to bring stability to the commercial financial markets. Its existence and the investment that would follow would help create many new jobs and help preserve millions of existing jobs.
Suggested refinancing (GCMBS) loan terms could be:
30-25-20-15 year terms, fully amortizing loans
Initial interest rate of 3% for years 1 & 2, 4% for years 3 & 4, and 5% fixed thereafter for the remaining term of the loan with no prepayment penalty.
Basic underwriting loan criteria could be up to 80% Loan to Value - LTV - and a 1.20 Debt Service Coverage Ratio - DSCR.
2. Home Refinance and Loan Modifications. A home loan program should be created to provide all homeowners, especially the majority of those who are current on their monthly mortgage payments, with the ability to refinance their existing home loan. The new loan could be with either their existing lender or a new FHA-guaranteed lender at a lower 3% fixed interest rate, 30-year fully amortizing loan, with no prepayment penalty and total refinancing loan fees and all closing and escrow costs not to exceed 2% of the new refinancing loan amount. Those homeowners who are currently in arrears and/or in the middle of any foreclosure proceedings with their current home mortgage debt lenders who wish to remain in their homes and work their way through these challenging times would be offered either a reduced home mortgage debt balance and/or a lower 3% fixed rate, 30-year fully amortizing loan with no prepayment penalty and with total loan modification fees and closing and escrow costs not to exceed 2% of the new loan modification amount. BUT the loan modification program that also offers realistic principal debt reduction relief, (up to a maximum 50% debt reduction) besides just a lower 3% fixed rate 30-year loan, will also require that the homeowner relinquish 50% of their future home equity to the Government, on a declining scale (1st year 100%, 2nd year 90%, 3rd year 80%, 4th year 70%, 5th year 60%) over the first five years and then 50% for the remaining life of the home after the first five years, as it applies to the initial mortgagor, but not applicable to subsequent owners. In lieu of the payment of a portion of the home's equity at the time of sale, a homeowner who receives principal debt reduction under this program could pay, either at the time of sale or at the time of refinancing, or at any time in the future a sum equal to the amount of the principal debt relieved plus interest at 5%. Under this loan modification program the taxpayers will most likely be paid back the amount the Government paid out with a profit. Any new home loan refinance and/or modification that provides the homeowner with just a lower 3% fixed rate, 30-year fully amortizing, no prepayment penalty loan, but with no principal debt reduction relief, would not require, or be subject to any Government-shared home equity participation.
3. Reduce All Taxes. All taxes, including capital gains tax, should be reduced across the board to stimulate growth, investment and unleash the American entrepreneurial spirit. Any federal tax reduction should include a provision that prevents the states from simply increasing their taxes to eliminate the benefit of a federal tax cut. Waste in all Government programs should be eliminated. In effect there needs to be PRACTICAL ECONOMIC STIMULUS AND FISCAL RESPONSIBILITY, INCLUDING FAIR AND EQUITABLE REFORM OF ALL SOCIAL ENTITLEMENT BENEFITS.
4. Institute a Real Genuine Energy Independence Program. The Government should implement a new Energy Independence Program that will permit America, without environmental obstacles and delays, to immediately start drilling for oil HERE & NOW in the U.S.A. All areas showing real potential to yield oil, whether off shore or in ANWR, should be opened to exploration, with reasonable but prudent environmental considerations. The country should encourage the development of new refineries, develop more solar, wind, clean coal and tidal alternative renewable energy resources, develop safe new nuclear power plants, more natural gas development to help power industry and develop new fuel-efficient, electric, hybrid cars. By developing all of the above ASAP we will create millions of new jobs here in America and become energy independent within five years or less, stopping the transfer of billions of U.S. dollars overseas to unfriendly nations and instead reinvest those $100's of billions right here in America.
5. Invest in a National Public Works Program. Approximately $150 billion should be used for our nation's infrastructure, bridges, roads, water and sewer lines, schools and hospitals and new power transmission lines. These expenditures will create thousands of jobs in every state and be a wise long-term investment in our nation's future.
6. Temporary Suspension for 6 to 12 Months of the Federal Payroll Withholding Tax. In order to increase the average worker's take-home pay by 20% to 25%, and thereby increasing disposable income back into the economy, the Federal Payroll Withholding Tax should be suspended for 6 to 12 months. Such a suspension would go hand-in-hand with tax relief to the average worker.
7. Fiscal responsibility. America cannot continue to spend more than its tax revenues. We must balance the Federal Budget and start reducing the National Debt by cutting wasteful government spending and creating a healthy free-market economy, to promote private sector jobs and a thriving small/medium business climate that will create additional tax revenues and generate long-term economic growth.
Estimated Initial Potential Cost. Approximately $1 trillion, but using the unspent portion of the currently appropriated Stimulus, TARP and Quantitative Easing funds may not actually require much additional government spending. It is simply a matter of spending the previously allocated Stimulus, TARP and the Fed’s Quantitative Easing money more wisely to help Main Street, all homeowners, renters and small/medium businesses in a way that will stimulate the economy and create jobs. There is no question that is a lot of money; but it will be far less costly in loss to the economy and resulting human misery than doing nothing or continuing on our current path. Most likely the cost will be less and more than offset, since it will be paid back quickly due to major job creation, positive economic growth and prosperity.
The alternative is this lingering, long, deep, historical recession or another Great Depression, instigating massive business failures, 15% - 25% or higher unemployment, collapse of the real estate, financial & credit markets with massive bankruptcies. The cost will be much more to our nation's economy and national security than the cost to implement this suggested, realistic "One-Year Mortgage Holiday 7 Point Economic Recovery & Jobs Plan."
We are Americans. We live in the greatest country ever known to mankind in the history of the world. We must continue to act and believe that we are indeed "The Land of The Free And Home of the Brave." Accepting and implementing bold change is what made this country great. We can and will work our way through these crises as well by rolling up our sleeves and working together as Americans, united, putting our country first for real positive, common sense, fair and equitable economic change for all of America.
God Bless America!
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