Sign-up and post on Iberkshires today.It's Free!
Already a member? Log In
18°  H- 62%
The Berkshires online guide to events, news and Berkshire County community information.
Friday January 9, 2009
 Make us your homepage!
 

Daily Digest

Mercury Spill
The Berkshire Eagle is reporting a minor mercury spill at Hillcrest Educational Centers in Great Barrington.

Do you know what's happening? Tell us at info@iberkshires.com.
New Contest!
Try for an awesome ski package at Ski Butternut! Scroll down the page to iBerkshires Trivia!
Duff'em If You've Got'em
North Adams Regional Hospital went smoke-free Monday — so did all its sister sites, from Sweet Brook to Northern Berkshire Family Practice to the Women's Exchange. No ashtrays, no smoking: No butts about it.
Meetings
The Drury High School Council meets Tuesday, Jan 13, at 6:30 in the conference room. Agenda items include AYP, school grant, laptop initiative and PowerSchool updates.
How much is heating oil this week?
How to get heating help
Wanted: Eagle Eyes
MassWildlife's annual eagle count runs Dec. 31 to Jan. 14. Anyone sighting one of the regal birds in Massachusetts is asked to participate.

Send date, time, location and town of eagle sightings, number of birds, whether juvenile or adult and observer's contact information to Mass.wildlife@state.ma.us.
Need to contact iBerkshires? Here's how.
Like to Write?
iBerkshires accepts submissions about local events, news and opinion pieces. There are openings for freelance work, too, for qualified candidates. E-mail tdaniels@iberkshires.com to find out more.
Work at the State House
Sen. Benjamin Downing is looking for college-level interns to assist at his State House office this semester. Send your resume and cover letter to Bethann Steiner, chief of staff, Office of Sen. Benjamin Downing, State House, Room 413-F, Boston, MA 02133.

Region

Pownal Tax Rate May Rise
Vermont Yankee Leaks
Life Sciences Wants Stimulus Boost
Pay Raise Puts Lawmakers in Bind
Citgo: We Have Oil 4 Joe
Galusha Buys Green River Farm
St. Francis Prays for Appeal
Cheshire Settles for $1.2M
Readsboro Utility Damaged by Storm
State Preps for Bulge Battle
Stockbridge Opposes Pike Link

Songs From St. James (Vt.)

What's Playing


Adam Sandler experiences "Bedtime Stories" that come true.
Movie schedules and times

Sales Fliers

 
 

Columnists

That's Life

O Christmas Tree

Independent Investor

Take Your Required Minimum Distribution

Pick of the Week

Amy Grant

Obama Transition

Your Seat at the Table
Track who's meeting with the Obama transition team and what they're proposing.
Federal government has 8,000 job openings
Are you going to the inauguration? We'd like to hear from you. E-mail to info@iberkshires.com.
The president-elect's new Web site
www.change.gov
Essay Winners Will Get Inaugural Tickets
Marvel Comic Features Obama

Other Stuff

Mars Rovers Mark 5 Years
Spirit
and Opportunity have been trekking the red planet for half a decade. Spirit hit the 5-year mark on Sunday; Opportunity will on Jan. 24.

 Search: 
 for    

Related Stories

 
Printer Friendly Version
   Recommend this story to a friend

Independent Investor: Treasury Floats a Mortgage Trial Balloon

By Bill Schmick - December 04, 2008
iBerkshires Columnist

Bill Schmick
Wednesday night, the U.S. Treasury Department leaked the rough details of a plan designed to boost home sales. The scheme would use the weight of government-owned mortgage giants Fannie Mae and Freddie Mac to "encourage" banks to lend money a full point below existing 30-year, fixed-rate mortgages. OK, I admit, that got my attention.

No, it isn't a total solution to the housing mess since it does nothing to solve the foreclosure problem, which continues to worsen. Nor does it allow homeowners struggling with high adjustable-rate payments to refinance at the lower rate. What it could do however is allow as many as 2.5 million Americans to make a hefty dent in the growing inventory of unsold homes.

To me, the plan would make more sense if they permit re-financings. Otherwise, we would end up with a two-tier interest rate scheme: one rate for new buyers and a higher rate for everyone else. If history is any guide, it would take less than a nano-second before some enterprising mortgage company figures a way to arbitrage the two rates while circumventing the intent of the plan.

Some critics rightfully argue that it would help those least in need of a bail-out. It would allow the wealthy or those with jobs with financial assets to buy up real estate at bargain basement prices with the lowest interest rate in 50 years.

True enough but riddle me this, dear reader: how else are we going to get those buyers sitting on the fence to actually plunk money down on a home? Prices have already dropped 20 to 30 percent and still the inventory of houses for sale continues to rise. Without an incentive will housing prices have to fall by 20 percent, 40 percent or even more?

There will also be a salutatory ripple effect on overall mortgage rates as well as home equity loans. As more and more houses are sold at the lower rate, I believe it will pressure other lenders to lower their rates in order to attract some of that new business. That would benefit those most in need.

Take my situation for example. Fortunately, I'm one of those writers who follow my own advice. Over the last few years, I've managed to pay down debt. At the same time my wife lost her job this summer and prospects for employment seem dismal. I vacillate between wanting to buy a home closer to work and enjoying my debt-free security. I've been looking and waiting for home prices to decline further. If this 4.5 percent fixed-rate plan actually happens, I would be sorely tempted to take the plunge.       

Detractors of the plan argue that the last thing the country needs right now is for another couple million of us to go into debt. Since hundreds of thousands of workers are projected to lose their jobs next year, saddling oneself with a 30-year mortgage could be financial suicide. Others say that lowering interest rates is what created the housing bubble in the first place and this plan is simply an attempt to revive that process.

Clearly, it would do nothing for those who are unemployed or shortly will be losing their jobs. Banks lend or re-finance on the customer's ability to re-pay not on what collateral the borrower can put up. Recent forecasts point to a doubling of this year's 2.25 million foreclosures by the end of 2009 because of job losses and the recession.  The government has already begun to address those issues through a variety or programs.

However, Federal Reserve Chairman Ben Bernanke told Congress on Thursday that "more needed to be done" to stem foreclosures in the country. He outlined several new avenues lawmakers should consider. No doubt, the new administration will do just that. And yes, it would be nice if someone could come up with one simple solution for the myriad of problems that seem to pop on a daily basis in this economic maelstrom.

But wishing gets us no where. This plan actually addresses part of the demand side of this housing problem and because it does it deserves our attention.

Bill Schmick is a licensed investment adviser representative and portfolio strategist as well as a registered financial planner with Berkshire-based Dion Money Management, which manages more than $500 million for middle-class Americans from coast to coast. Direct your inquires to Bill at 1-877-850-7942, Ext. 146, (toll-free) or e-mail him at wschmick@dionmm.com. You can also visit www.afewdollarsmore.com for more of Bill's insight.
Your Comments
Post Comment
Great article. You are a great American. We appreciate your insight and look forward to you and your wife buying a home at great bargain price in the Berkshires at a 4 and a half interst rate.
from: Ben and Hankon: 12-05-2008



iBerkshires.com Text Ads
www.williamsinn.com
www.mcla.edu
www.jiminypeak.com
www.myspace.com
Advertise on iBerkshires.com



Essentials
Berkshire Nightlife
Berkshire Photos
Berkshire Wallpaper
Borrow Movies
Class Reunion Page
Columnists
Dannyoart.com
Movie Times
Obituaries
Randy Trabold

Enter your email address below to receive our FREE iBerkshires.com Newsletter

| Home | A & E | Automotive | Business | Community News | Dining | Lodging & Travel |
| Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings | Berkshires Map |
Advertise | Recommend This Page | Help
Contact Us | Privacy Policy| User Agreement
Execution Time: 8588 ms