Following is the plan we published in USA Today on December 9, 2008.
The updated plan can be viewed by going to remortgageamerica.com
WHAT AMERICA CAN DO TO AVOID A DEPRESSION
A plan offered by a concerned citizen
A plan offered by a concerned citizen
I believe the following plan should be implemented immediately if America is to avoid a long-lasting recession or even a depression.
THE PLAN:
The US government offers every US citizen
a 30-year mortgage at a 1½% fixed rate of interest.
a 30-year mortgage at a 1½% fixed rate of interest.
All financially qualified US citizens, not just those in immediate danger of default, would be able to finance a new or existing primary residence, with a $500,000 lifetime limit of government capital for everyone.
Right now, the US Government is lending money at low interest rates to many companies. Why not lend it directly to the people?
Right now, the US Government is lending money at low interest rates to many companies. Why not lend it directly to the people?
Why the plan will work:
It will stop home prices from falling.
It will prevent most foreclosures and turn the housing market around.
It will let everyone save and spend more.
When the US Government refinances a 7% mortgage at 1½%, it will cut your monthly payment almost in half. On a $200,000 loan, the payment will decrease from $1,330 to $690. And when you save or spend that extra $640 each month, it will stimulate our economy.
It will increase credit availability.
As existing mortgages are paid off with lower rate government loans, the holders of those mortgages will have a cash inflow that will allow them to make new loans to people who, because of lower mortgage payments, will now be qualified to purchase other things on credit. Instead of a trickle down plan to stimulate the economy, this is a trickle up plan that moves funds into the financial system by starting with the people.
It will create jobs.
With increased credit availability and more money being spent, companies will decrease layoffs and expand new job creation.
It will increase tax revenues.
Government tax revenues will increase for two reasons. First, taxpayers will have a smaller interest deduction, because they will pay less interest on their mortgages. Second, as the increase in spending and credit availability stimulate the economy, tax revenues will increase over time.
It will not increase the deficit.
This is a government loan program—not an increase in government spending—so the money will be repaid.
It will reverse the economic decline now underway.
Saving people’s homes while increasing consumer spending and solving the financial industry’s credit crunch will stimulate the economy, resulting in increased tax revenues and a reduction in the deficit. We also believe this plan will increase home values, which will offset some of the financial losses experienced during the past few months..
It will reduce the losses of mortgage holders.
In order to work, the plan would require the government to oversee the refinancing of existing mortgages in a way that takes account of falling market values. The new loans will keep many near-default citizens in their homes; and even though lenders may take losses during the refinancing process, the forced fire sales will end, which will let them reclaim a larger percentage of their capital investment.
It is better than what Washington politicians are doing now.
Although it is possible to poke holes in anything, the foundation of this plan is sound, which is why it will do more than anything being discussed in Washington to turn the economy around quickly and promote prosperity for the coming decades .
It can be implemented immediately.
This plan should be implemented immediately, because the economy is getting worse each day. Washington politicians doled out billions of dollars to big corporations over a weekend. So they should be able to put this plan into action in 30 to 90 days.
US citizens deserve and need this plan.
The American people who helped build this country deserve and need a plan like this—a plan that will help them directly while also stimulating economic prosperity, just like the GI Bill did after World War II.
It will prevent most foreclosures and turn the housing market around.
It will let everyone save and spend more.
When the US Government refinances a 7% mortgage at 1½%, it will cut your monthly payment almost in half. On a $200,000 loan, the payment will decrease from $1,330 to $690. And when you save or spend that extra $640 each month, it will stimulate our economy.
It will increase credit availability.
As existing mortgages are paid off with lower rate government loans, the holders of those mortgages will have a cash inflow that will allow them to make new loans to people who, because of lower mortgage payments, will now be qualified to purchase other things on credit. Instead of a trickle down plan to stimulate the economy, this is a trickle up plan that moves funds into the financial system by starting with the people.
It will create jobs.
With increased credit availability and more money being spent, companies will decrease layoffs and expand new job creation.
It will increase tax revenues.
Government tax revenues will increase for two reasons. First, taxpayers will have a smaller interest deduction, because they will pay less interest on their mortgages. Second, as the increase in spending and credit availability stimulate the economy, tax revenues will increase over time.
It will not increase the deficit.
This is a government loan program—not an increase in government spending—so the money will be repaid.
It will reverse the economic decline now underway.
Saving people’s homes while increasing consumer spending and solving the financial industry’s credit crunch will stimulate the economy, resulting in increased tax revenues and a reduction in the deficit. We also believe this plan will increase home values, which will offset some of the financial losses experienced during the past few months..
It will reduce the losses of mortgage holders.
In order to work, the plan would require the government to oversee the refinancing of existing mortgages in a way that takes account of falling market values. The new loans will keep many near-default citizens in their homes; and even though lenders may take losses during the refinancing process, the forced fire sales will end, which will let them reclaim a larger percentage of their capital investment.
It is better than what Washington politicians are doing now.
Although it is possible to poke holes in anything, the foundation of this plan is sound, which is why it will do more than anything being discussed in Washington to turn the economy around quickly and promote prosperity for the coming decades .
It can be implemented immediately.
This plan should be implemented immediately, because the economy is getting worse each day. Washington politicians doled out billions of dollars to big corporations over a weekend. So they should be able to put this plan into action in 30 to 90 days.
US citizens deserve and need this plan.
The American people who helped build this country deserve and need a plan like this—a plan that will help them directly while also stimulating economic prosperity, just like the GI Bill did after World War II.
Contributor and spokesperson: Dennis F. Paulaha, Ph.D. Economics
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