The Housing Stabilization Program You Haven't Heard About

[babylonsister]

The Housing Stabilization Program You Haven't Heard About

Apr 10 2010, 10:00 AM ET


The Neighborhood Stabilization Program (NSP) isn't something you read a lot about in the news. Most headlines are grabbed by some of the government's more well-known interventions such as the home buyer credit and the Treasury's foreclosure prevention program. But all three are part of Washington's unprecedented effort to prop up the ailing U.S. residential real estate market. The NSP is a smaller endeavor, but its methods could be more effective than any of the others in staunching the housing market's bleeding while also creating jobs.

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How the Program Works

Interim Director Miriam Carrillo and Community Development Specialist Linda Connors of the city's Housing and Urban Development program provided a hypothetical example of how the program works:

* First, city representatives review foreclosed properties and bid accordingly. Imagine they obtain one for $64,000 (which is their average purchase price).

* Next, they need to bring the house up to code. So they put $50,000 into its renovation (again, the average cost). In total, they would have spent $114,000.

* Then, they find a qualifying buyer (for example, a family of four with an annual income of between $56,950 and $85,440).

* That buyer independently obtains pre-qualification from a bank for a mortgage of $84,000 to purchase the home (average sale cost is between $80,000 and $150,000).

* The stimulus funding covers the $30,000 difference (and can cover up to $80,000 per transaction).

* The subsidy is kept as a 2nd lien that disappears after 20-years, but must be paid before that if the house is sold. This is meant to prevent flipping.

more...

http://www.theatlantic.com/business/archive/2010/04/the-housing-stabilization-program-you-havent-heard-about/38739/

[boppers]

1. Interesting. K&R So others can hear about.

This might actually work for me, if the city can front the cash.

[mike_c]

2. this is all well and good for the banking industry...

...which benefits directly when people are convinced to go into lifelong debt to buy houses, but what about renters? The direct benefit to home buyers in this program is lower housing costs-- the subsidy effectively lowers the amount of money they finance without lowering the bank's profits, leading to lower monthly housing costs but ONLY if you agree to participate in the debt/finance industry.

I'd like to see comparable federal programs for the rest of us. Of course, such programs probably wouldn't enrich the bankers nearly so much, but is that the objective, or is keeping people housed affordably the objective?

[4lbs]

3. Why would you rent when you could buy a house for just $85,000?

That's a monthly mortgage payment of just $510 monthly with a 30-year fixed at 6%.

Most people pay more than that in rental and don't get any equity.

[mike_c]

5. I seriously doubt that would happen in my NorCal neighborhood...

...but I suppose I'd be happy if it did. The house I've lived in for the last decade-- about 1200 ft² on a tiny, city lot in a small, rural NorCal town-- appraised for about $140K twelve years ago, just before I rented it. A couple of years after I moved here, the neighboring houses, which are in considerably worse shape, sold for $350K and more. That was the bubble rolling through. I suspect they eventually hit half a million, and they were the same houses that were appraising for $100K or so a few years earlier. The increase in value was entirely artificial. That is the first reason that I stayed out of the housing market. At the time, my monthly housing cost would have at least doubled if I had bought the same house I am renting.

I'm in my midfifties now. I've never owned a home, but buying one now? I'm going to retire in a few years, or at least I'm hoping to. Why would anyone in my position take on hundreds of thousands of dollars in debt? I mean, it's not like I have $100K to spend.

[Robb]

4. You would rather concentrate real estate ownership?

Serious question. What if the only people who owned property were a wealthy class of landlords?

[mike_c]

6. not at all-- but that is what the current housing model is designed to do....

I'm guessing that the majority of homes in the U.S. are effectively owned by financial institutions, not the individuals who live in them.

[leveymg]

7. The majority of the housing stock is effectively owned by the US Government

given the bailout and subsidies of the mortgage lending industry. We already have a socialized housing system, but with the profits going to the middle-men in the zombie mortgage and foreclosure complex. The worst of all possible systems.

[Clio the Leo]

8. kick! NT

[SpartanDem]

9. K&R

[CBR]

10. +1... Also the Homeless Prevention and Rapid Rehousing

Program -- Rent assistance. Pat of ARRA.

http://www.hudhre.info/hprp/