Bankruptcy & Foreclosures

So we’ve been discussing tax rebates of late as a means of economic stimulation but believe it or not, Congress has been kicking around more direct ideas to stimulate the slumping mortgage market as well. Their plan, if approved, would raise the cap of GSEs- Government Sponsored Enterprise for a 12-month period.

Up until now the story for trying to spark life into the mortgage industry has been one of slashed interest rates to make borrowing more appealing. This new stimulus plan would differ by actually (temporarily) lifting the dollar amount of loans that are eligible for purchase by Fannie Mae and Freddie Mac which are insured by FHA (Federal Housing Administration).

The package would actually be confronting the economic recession on two major fronts by putting more cash in the hands of the individual and by increasing the number of loans that will qualify for FHA backing (hence lower interest on fixed rate mortgages).

Many annalists feel that the government’s quick acting measures to compensate for the weak areas of the crumbling economy may be the measure that separates this slump from earlier (full blown) recessions. Will it work? Only time will tell.