The government recently took over Fannie Mae and Freddie Mac, two huge mortgage lenders. I thought the government owned them all along. After all, Freddie Mac” is the Federal Home Loan Mortgage Corp. and Fannie Mae is the FederalNational Mortgage Assoc. But they were privately owned, essentially bankrupt, and in need of a bailout. For more background, see Web of Debt, by Ellen Hodgson Brown, The source of the bailout funds will be my tax dollars, and yours. This gives us the right to a voice on how to execute the bailout. I had a long conversation with Mitchell Kitroser, Esq. , an attorney based in Florida. Kitroseris focused on Real Estate, Probate, Elder Law, Medicaid Planning, Guardianship and Estate Planning.His plan willstimulate the economy,put more money in the U. S. Treasury, and helphomeowners and taxpayers.
As the old saying goes, “If you have lemons, make lemonade.” Here’s my recipe for lemonade. Let’s use the banks we just bought to get us out of the real estate mess those and other banks created, and at the same time, to help American homeowners – to help ourselves. We will stimulate the economy and provide the government – our government – the government “of the people, for the people and by the people” – with a revenue stream. We will even help homeowners stay in their homes.
Since our government just went into the mortgage business, it should start doing refinances. Every American who wants to refinance their primary residence should be permitted to do so, through our new government owned banks, Fannie Mae and Freddie Mac. These mortgages should be at very low rates – 2% or 3% per year. The savings on the traditional 30 year fixed mortgage, using a $200,000.00 at 6% interest refinanced to $200,000 at 2%, would be almost $450.00 per month. The savings would be about $225 per month on every $100,000 of debt.
John and Jane Doe are going to foot the bill for the Fannie-Freddie bailout anyway; this way they get something in return: the ability to continue to afford and live in their home and not be squeezed for cash. And to make it fair, every American family who wants to refinance their home should be able to take advantage of this plan. I am NOT suggesting that people be allowed to take cash out under this refinance program. I believe that would be inflationary and is a part of what got us into this mess in the first place. The goal here is to keep Americans in their homes.
Two added bonuses: instead of paying interest, “we the people,” would be collecting interest. And while the government is collecting money, each homeowner would be pocketing the savings from a lower interest rate mortgage. The total amount of mortgage money outstanding on homes in America is about $10 Trillion. Fannie and Freddie alone guarantee about half of that sum by themselves. If half of the total number of homeowners took advantage of this program (and who wouldn’t?) and even if the government charge 2% interest, our government would collect $100 billion per year in interest on this money. If everyone refinanced at 2%, our government would collect $200 billion per year. At 3%, it would collect $300 Billion per year. And, in addition, each homeowner would save $450 to $1,200 per month, which would go somewhere – a new car, a child’s college education, a parent’s graduate school or occupational training, a solar energy system, a vacation.
The down side is that the banks and the Federal Reserve Bank will lose money and power, so they won’t want to do this.
The path we are on today is more debt and higher taxes. Fannie Mae and Freddie Mac make Enron look like Sesame Street. We just bought these lemons. We own them. It’s time to make lemonade.