The U.S president addressed the nation concerning the New Plan for Mortgage Relief (Crum 1). The participants present during the address included the residents of Nevada, the president and CEO of Nevada Bankers Association, Bill Uffelman, the attorney of the Legal Aid Centre of Southern NV, Michael Joe, as well as, LA Times Reporter, Jim Puzzanghera. The president provided some of the details of the new plan for mortgage relief. According to this plan, homeowners with non-federally backed loans will be able to refinance to take advantage of lower interest rates. Initially, only loans backed by Fannie Mae and Freddie Mac were eligible for the Home Affordable Refinance Program (HARP). There has been debates concerning the issue whether the pan would work or not.
The issue covered during the president’s address was the excess payments made on homes that were higher than the value of those homes. Nevada residents claimed that they wanted to retain their houses (Crum 1). The problem encountered includes unemployment rate in Nevada, hence increasing the fear of lack of security in owning homes. Politicians were encouraged to improve employment opportunities to enable the residents to have income sources that would be spent in job creation within the homes. Thus, the issue was to spend money on a home that an individual may not be able to own. Therefore, the New Plan for Mortgage Relief was to stimulate the economy and enhance job creation. This would ensure an increase in the benefits of owning a home, particularly to the southern Nevadans. In addition, it would make individuals invest in their land and stimulate the local economy. In Nevada, many houses are being foreclosed. Homeowners argued that home prices were at the levels of the past two or three decades. Thus, if the monthly payments are high, homeowners should decide to let go into foreclosure and live in their houses rent-free as long as they can. They can benefit by making savings because the returns obtained from renting out the houses would be less. A foreclosed house has many advantages, for instance, if it is later purchased by an investor or rented out.
The current value of houses is much less than it was in the past decades. Thus, it is not easy to refinance the houses since there is a lack of equity to qualify. Some homes sold out still show that the owners and not the banks are responsible for ownership. This has contributed to the lack of proper maintenance in the homes. This condition is expected to continue unless the bans step in to intervene. These properties will continue to depreciate until potential investors re-innovate and turn them into rentals. The refinancing was considered the best solution since mortgage insurance increased the payments by large sums of money. This made emphasis on the benefits of refinancing. The creation of artificial demand for homes by the provision of mortgages to unqualified buyers by banks presented a considerable problem to the housing sector (KNPR). The banks intended to offer the mortgages to resell them for personal motives. They created artificial demand raised the house prices, hence creating an oversupply that is the current cause of low house prices. In addition, this had serious implications for the local economy because of the rates of unemployment, particularly in the construction sector. Hence, the banks should take responsibility for their actions.
Bibliography
Crum, Elizabeth. “Obama to Talk Home Refinancing in Las Vegas Following Romney’s Controversial Foreclosure Remarks.” TheLasVegasInformer.com. The Las Vegas Informer n.d. Web.