Time To Release The
Refinancing Hounds
Could refinancing be the spark needed to get the housing market
and the general economy moving again? The case for this has to be made. Here
are some reasons why in the medium to long term, it should help everyone
involved in the cycle:
-
Homeowners – There are many homeowners that have
proven their worth by still paying on mortgages.
-
Businesses – Everything connected to housing
would benefit from this type of move. Builders would see more activity. Local
governments could start seeing higher tax revenue. Families could start living
in their own homes.
-
Banks – Most homeowners have shown that even
though they will not be able to refinance their loans, they have not walked out
on them. The ones that couldn’t are
already out of the system. The banks should take advantage of this loyalty. The
amount of money received right away from the fees will at this point outweigh
the loss of revenue over the next 25 years. Some banks that are not as tied to
trading for profits as others could use this to boost current period revenue.
The How To Plan
-
First, target all homeowners that are consistent
with their payments and are within a certain percentage (maybe 2-5) of the
current requirements for refinancing.
-
Offer them a standard refi program with a
penalty fee worth the thirty year Net Present Value of the reduced value of the
home.
-
Another option is to attach an annual fee to the
mortgage if the Net Present Value of the reduced value is too high.
