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Fiscal Cliff or Fiscal Slope?
Now that we know that Mr. Obama has been re-selected as President, will he be Mr. Hope or Mr. Nope. Real estate experts (i.e., think tankers, economists, investors and hedge fund managers), are in general agreement on about half a dozen policy points that could shift the direction of real estate into a near term upward permanent trajectory for the entire country.
The unusually great aspect about the after mentioned “experts”, is that unlike other professionals (i.e., politicians, pundits, super PAC Billionaires, paid cable TV junkie-flunkies), real estate professionals for the most part co-exist within a fraternity like environment and actually like each other. (except for Donald Trump).
Similar to athletes – who commune with each other, irrespective of their ethnicity, culture, taste in music, etc., real estate pros operate within the same attitudinal airstream. They get it. They have their sights on the end game. Which in short translates into – how the hell do you clean this mess up and make everybody a winner.
In a perfect world (uninhabited by Republicans or Democrats), this is what real estate experts see in part as the holy grail to the valley of Hope, where Nope is not an option.
5 Ways from Nope to Hope
1. Although with the Fiscal Cliff and all, the mortgage interest deduction is on the table, don’t hold your breath. Since, irrespective if it’s on or off the table, national legislators should be providing vouchers for first time home buyers. Some have suggested vouchers in the amount of $5,000 for married couples and $2,500 for singles. This takes money off the sideline and puts thousands of Americans into the good game of home ownership.
2. Expand the Making Home Affordable program. In its current iteration, one of its programs is called HARP 2.0. This revamped mortgage refi program is helping tens of thousands of families reduce their mortgage payments dramatically.
3. Expand the HomePath program. This program serves up foreclosed homes to investors a la carte. Most properties don’t require an appraisal, have low down payment requirements, and nearly no closing costs. Its’ a real estate investor’s wet dream come true. It should be noted, that the HomePath and Making Home Affordable programs enjoy bi-partisan support (although begrudgingly). Bottomline, support is support and the expansion of these programs is critical.
4. Force lenders to put some skin in the game! American tax payers are getting tired of back-stopping their asses. A “shared appreciation mortgage modification” program does the trick. Easily stated, if a bank agrees to forgive what is owned on a home, vs. what the home is worth, the bank becomes an equity partner on the homes’ future appreciation (or deprecation). As a real estate professional myself, this is creative financing at its best, and helps separate the men from the boys.
5. As an innovative proposal – and almost a radical decree, regulate (with a big fat R), a national set of rules on how to handle homeowners who fall behind on payments. Force banks to offer “delinquent insurance” to homeowners, who if delinquent, would trigger use of the insurance if they became unemployed and/or unable to keep up with their mortgage payment.
As a panacea, none of the after mentioned incentive programs will act as a single magic pill to solve the ills of the still persistent real estate hangover. But collectively, they provide a strong broth, that if served up correctly, will help a lethargic real estate market come back to life with new vigor.
D. Sidney Potter has worked in the real estate and mortgage industry since 1992 and is a licensed member of the National Association of Home Builders, and the National Association of Realtors. Mr. Potter has a BA in Political Science, 2 MBA’s and part of a doctorate degree from Pepperdine. He has extensive experience in both commercial and residential real estate in California, Nevada, and Arizona and has consulted investors and the media throughout the United States. Most recently he served on the Board of Directors for two major HOA’s in Las Vegas. In addition, Mr. Potter is a contributing writer to iReport (CNN), DigitalJournal and Newsvine.com (a part of MSNBC).