Government Unveils Its Plan For Housing

Obama and the U.S. Treasury have revealed their housing plan, and its both extensive and wildly expensive. The government is putting aside $75B to help 9 million homeowners stay in their homes. In addition, $200 billion in losses will be absorbed at Fannie Mae and Freddie Mac.

The program requirements will be laid out in detail on March 4th. Meanwhile, a FAQ for the program is setup on the White House’s Blog.

From the looks of it, there doesn’t seem to be any assistance for jumbo loans, which doesn’t necessarily help many high value areas such as Silicon Valley. I suspect what we will see prices to stabilize on lower priced properties as the cost of owning falls into line with that of renting – something that became very disproportional over the past few years. On the higher priced properties, we’ll likely see further deterioration in prices as we regress to historical price to income ratios – another ratio that went off the charts over the past few years as a result of interest only, option arm, and/or negative amortization loan products.

Some of the various situations that homeowner’s might be in now and how the government program will help are included in the document below:




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