President Barack Obama announced a $75 billion mortgage relief plan Feb. 18. The Homeowner Stability Initiative is aimed to help as many as seven to nine million distressed families threatened by foreclosure, stay in their homes by making it easier to refinance and adjust mortgage payments, according to an article by MSNBC. The plan was announced in Arizona, one of the states that has been most affected by the negative housing market.
Fortunately for those living in Texas, the housing market has not seen as much impact as the rest of the United States.
"Waco hasn't been hammered like the rest of the country," Waco Community Development Center Representative Mike Stone said. "We've seen effects, but not that way. The main effect for us is the tightening of the lending rules. Texas' lending laws are a lot tighter than that, some people call them antiquated, but we haven't been hit by all of that. It kept us out of trouble."
According to Moody's Economy.com, out of roughly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth.
"In the end, all of us are paying a price for this home mortgage crisis," Obama said at a high school outside Phoenix. "And all of us will pay an even steeper price if we allow this crisis to deepen."
More than one million people in the U.S. have lost their homes in the housing crisis, and Obama said a further six million homes were at risk of foreclosure.
Due to the fact that different states have different laws concerning loans and interest rates, it is easy to spot where the housing crisis has had the most effect. California and Florida have the highest foreclosure rates out of the entire country. When this is combined with the extremely high cost of living in these places, it makes it difficult to live comfortably there.
"Forty percent of foreclosures were in those two states," Stone said. "The last I heard, their housing values had depreciated by 25 percent. There were a lot of folks in those states that got some really crazy loans, and they had clauses in their loans that if the values decreased below a certain magic number, they would reset. A lot of them are resetting right now, because their values have gone down."
Obama plans to take an existing housing incentive, put in place by former President George W. Bush, and make it even more beneficial to those who wish to purchase a home.
"Bush passed that tax credit for first-time home buyers and I've heard that they're talking about making that into a grant instead of a tax credit. So that's a good thing for home buyers. It's not something they can use at closing. But it is something that can help them once they've moved into a house," Stone said.
According to an article published by the Associated Press, $3.7 billion was given to repeal a requirement that an $8,000 first-time home buyer tax credit must be paid back over time for homes purchased from Jan. 1 to Aug. 31, unless the home is sold within three years.
With this changing from a credit to a grant, first-time buyers will not have to pay back the amount, allowing them to spend the money on other necessities associated with a new home.
Considering the housing and loan situation in the country, some local people have been afraid to invest in a home at this time. While it is true that other states are suffering from the high cost of living, the current local interest rates are low, at least compared to the high interest rate, which cycled over the last two years.
"A lot of families are concerned about buying a house right now because there's a lot of scare going on, so families are reluctant to buy a house," Stone said. "I think that's affected the market a little bit."
But opinions vary about this issue. Andrea Danford, a local real estate agent at RE/MAX, said that while the housing package is still pending, the stimulus package is already having an effect.
"The new stimulus package has been a godsend," said Danford. "Because of it, my business has gone back to normal, and more people are buying homes now."
Danford said more people are less afraid to buy homes now that they know the stimulus package will help protect their jobs.
She says that new home buyers will be getting back twice as much as they are putting down now.
"Now all that needs to happen is for the banks to give out more loans to people, and then things will go back to being normal," she said.
Students are beginning to realize the toll it will take on their lives also.
"I really hope there is an end to the things going on with loans and housing," Tyler sophomore Kyle Harropp said. "If things stay the way they are, it will make it really hard for our generation to own homes and start families."
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