Several proposals have been launched by Business Roundtable, an organization of chief executives, to contain foreclose homes for sale inventories in the country. They have called on Congress to expand provisions of the Making Home Affordable program which have shown effective results.
The first thing the roundtable has proposed is the extension of the life, amount and scope of the $8,000 federal tax credit which was offered to first time home buyers under the Making Home Affordable program.
The business executives proposed the increase of the tax credit incentive to $15,000 and its extension to all taxpayers making home purchases.
Business Roundtable member Richard Smith explained that the $8,000 first-time buyer tax credit has not made a significant dent on overall foreclosure homes for sale inventories because the tax credit affected only the lower end of the residential market.
Smith added that the proposed increase and extension of the tax credit would entice financially capable trade-up homeowners to get back into the housing market and make a dent on the higher end and middle portion of the market.
The executives’ second recommendation is the maintenance of mortgage rates at the 5 percent level for at least one more year. Mortgage rates suddenly climbed to 5.74 percent this week, after hovering below 5 percent for many weeks. The 5.74 percent level was the highest level reached in six months.
The Federal Reserve was able to maintain mortgage rates at historically low levels in the previous months by increasing its purchases of mortgage-backed securities.
With lower mortgage rates, more potential home buyers can buy foreclosure homes for sale units and help reduce foreclose homes for sale inventories.
With mortgage rates in the 4.5 percent range, a potential home buyer only needs about $84,000 in annual income to be eligible for a fixed-rate 30-year home loan of $400,000. Typically, a prospective borrower needs around $92,000 in annual income to qualify for the same loan and loan terms and a ten-percent down payment.
Thirdly, the Business Roundtable called on national legislators to make permanent the expansion of the limits of home loans qualified for federal government guarantees.
Under the housing and stimulus legislation approved in February, federal guarantees were extended to loans up to $729,750, a significant increase from the previous limit of $417,000.
The business executives argue that extending incentives to capable move-up homeowners will drive more sales and help cut down large foreclosure homes for sale inventories.
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