Refinancing Could Restart the Real Estate Market - Palma Financial

Allowing people to refinance their mortgage could be the catalyst to revive our economy and reduce unemployment. Critics point out that it sends the wrong message for those in need of refinancing since they were irresponsible and created their own financial woes. Their point is a good one, but it is no longer relevant in this age of government “bail outs”.

There were two distinct participants in the current mortgage crisis: Banks and Home Owners. The Banks were firm believers in Capitalism when their profits were flowing in during the peak of the real estate bubble. Once the profits dried up they became Socialists and asked for bailouts from the government.

Both the Bush and Obama administration bailed out the banks because they were “too big to fail”. How about “Joe the Plumber” an average homeowner in trouble?

I believe the numbers and the adverse impact on our economy are certainly too big to ignore; refinancing could restart the real estate market, a critical component of our economy.

The above is a response to a recent NY Times Op-Ed by Joseph E. Stiglitz and Mark Zandi.

The One Housing Solution Left: Mass Mortgage Refinancing

Well over half of all American homeowners with mortgages are paying rates that would appear to make them excellent candidates to refinance. Many of those with stable jobs, good credit scores and even a modest amount of home equity have already done so, taking out 30-year loans at rates around 3.5 percent, some of the lowest rates since the 1950s. But many others cant refinance because the collapse in house prices has wiped out their home equity.

Senator Jeff Merkley, an Oregon Democrat, has proposed a remedy. Under his plan, called Rebuilding American Homeownership, underwater homeowners who are current on their payments and meet other requirements would have the option to refinance to either lower their monthly payments or pay down their loans and rebuild equity.

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