1. A BILL
To allow all American citizens the option to modify their existing primary home
mortgage payment to 4% (4-percent Mortgage Payment Modification) without changing
the existing lenders; which will help stimulate the economy, decrease unemployment,
prevent more bank owned real estate, stop foreclosures, stabilize the housing market,
increase tax revenues, and help increase the American household budget.
Be it enacted by the Senate and House of Representatives of the United States of
America in congress assembled,
SECTION 1. SHORT TITLE.
This Bill may be cited as the “4 For Freedom Act of 2014”
SECTION 2. FINDINGS
(1) JPMorgan Loses Money Every Time it Makes A Loan
a. (Fortune) Every time JPMorgan Chase makes a home loan, it loses money,
$1,500 on average. That helps explain why banks are lending so little, and
why the housing recovery, which seemed to be zooming along just a few
months ago, has begun to falter. It also may say something about the sluggish
economic recovery. On Friday, JPMorgan (JPM) reported its first-quarter
earnings. They were less impressive than analysts were expecting, in part
because loan growth at the nation's largest bank in the country has evaporated.
JPMorgan had $730 billion in loans a year ago. It has the same now. But
JPMorgan is now lending out just 57% of its deposits. It used to be more like
80% a few years ago. As interest rates have began to rise for the first time
since the financial crisis. It wasn't much, around one percentage point, but it
was enough to crater one of the few businesses for the banks that had come
roaring back. And the housing market remains fragile. All of a sudden, all
those people who were rushing into refinance their mortgages every time rates
dropped stopped coming in. By Stephen Gandel - April 11, 2014
(2) How the economy stacks up: 2014 vs. 2007
a. (The Wall Street Journal) The economy has recovered virtually all the jobs
lost during and after the Great Recession. Some 137.93 million Americans
held jobs in March, according to the Labor Department’s survey of business
establishments. In May 2007, 137.95 million Americans had a job. The bad
news? It took seven years to restore the labor force to its previous peak. That
means there’s been no net job creation from mid-2007 through early 2014.
The slower-than-expected rebound in the labor market has prevented many
young Americans from getting a good job or earning enough money to afford
a new home. As a result, sales of new homes are still far below normal levels.
Not surprisingly, the prolonged bout of weakness in the housing market has
also been a drag on job creation and economic growth. The construction
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2. industry, for example, employs 1.71 million fewer people than it did in May
2007. And fewer home sales means less business for the companies that sell
the goods needed to furnish them. By Jeffry Bartash - April 11, 2014.
(3) Zombie Foreclosures Still Weighing on Housing Markets
a. NEW YORY (CNNMoney) Vacated by the owner and left unattended, nearly
152,000 "zombie foreclosures" are weighing on home values in states like
Florida, Illinois and New York, RealtyTrac said. That's roughly 21% of all
homes in the foreclosure process. On average, these homes have been going
through the foreclosure process for 1,031 days -- or nearly three years.
Related: Buy vs. rent: What you'll pay in 10 cities "The biggest threat from
foreclosures going forward is properties that have been lingering in the
foreclosure process for years, many of them vacant with neither the distressed
homeowners nor the foreclosing lenders staking responsibility for
maintenance and upkeep of the homes," said Daren Blomquist, RealtyTrac's
spokesman. By Les Christie - March 13, 2014
(4) Getting Ready for January 2014
a. (Mortgage Banking Association) Some are thinking about major compliance
deadlines coming in January and wondering how bad it will be. Some fear a
possible “train wreck” as the industry tries to meet the Consumer Financial
Protection Bureau’s (CFPB’s) January 2014 and subsequent compliance
deadlines. Deadlines that are now looming large for compliance with CFPB
requirements as to the ability-to-repay rule, Qualified Mortgage (QM) and
other new regulations under the Dodd-Frank Wall Street Reform and
Consumer Protection Act. Due to these requirements MBA (Mortgage
Banking Association) forecasts nearly 1/3 drop-off in loan volume for 2014.
By Scott Kersnar – November 2013
(5) Has the US housing market bottomed?
a. (Goldman Sachs) “Maybe, but I still worry about further price declines.
There’s no really concrete reason for an upturn now; a recent survey of home
buyers didn’t find any sudden change in optimism and there seems to be a
souring on the idea of home ownership. That might reverse again as the crisis
ends. But I suspect that it’s not easily reversed because the whole idea of
proudly owning a home has been tarnished. And now Congress is talking
about eliminating the whole mortgage deduction or government support for
Fannie and Freddie. These are all clouds on the horizon. That’s why I think
home prices may still go down.” By Robert Shiller, S&P Case-Shiller Home
Price Index - February 14, 2013
(6) 'Shadow REO': As Many as 90% of Foreclosed Properties Held Off the Market,
Estimates Suggest.
a. (Aol Real Estate) "Shadow REO" inventory: repossessed homes across the
country that banks or investors often purposely keep off the market. The
practice isn't a secret, and refraining from dumping a large inventory of
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3. foreclosures on the market helps to keep home prices from crashing. But the
extent to which lenders keep their stock of REOs -- industry parlance for "real
estate owned" properties -- off the market may be much larger than most
people think. As many as 90 percent of REOs are withheld from sale,
according to estimates recently provided to AOL Real Estate by two analytics
firms. It's a testament to lenders' fears that flooding the market with foreclosed
homes could wreak havoc on their balance sheets and present a danger to the
housing market as a whole. By Teke Wiggin - July 13th 2012
(7) A Long Way to Go
a. (Mortgage Bankers Association) Mike Fratantoni and Joel Kan, Economists
with the Mortgage Bankers Association (MBA), offer an outlook for the
residential real estate market in an article titled “Slowly Climbing Out.” The
essence of their message can be summed up this way: “Regardless of which
path the economy and the mortgage rates take, we are predicting another
tough year for the industry, with total residential origination volume coming
in at its lowest level since 1997.” The MBA economist writes that “continued
slow growth means unemployment will remain elevated through 2012.”
By Janet Reilley Hewitt – January 2012
(8) Why We're in for a Long, Hard Economic Slog.
a. WASHINGTON D.C. (The Wall Street Journal) Our study of all the postwar
recessions and the Great Depression leads to the following empirical
proposition: If there is no recovery in housing expenditures, confirmed by a
recovery in consumer durable goods expenditures, then there is no economic
recovery. In the Great Depression and in every recession since, recovery of
residential construction has preceded recovery in every other sector, and its
recovery has been far larger in percentage terms than the recovery in any other
major sector. Applied to the Great Recession, it appears that those who see
signs of a recovery may be grasping at straws. What one should hope is that
this time it is different from every one of the past 14 U.S. downturns, but
those who believe this have the weight of past experience against them. By
Steve Gjerstad and Vernon L. Smith – September 10, 2010
(9) Why Mortgage Modification Isn’t Working.
a. (The Wall Street Journal) Last year more than two million Americans lost
their homes to foreclosure. This year, that number is expected to be even
higher. Roughly 760,000 homeowners have received loan modifications on a
trial basis. But just 31,000 modifications have been made permanent. That’s
a success rate of just 1%. This means that up to 99% of eligible homeowners
struggling with their mortgage payments have been unable thus far to modify
their loans. By Arkadi Kulmann – January 20, 2010
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4. (10) President Obama’s Mortgage Relief Program Fails To Deliver.
a. NEW YORK (Associated Press) (Central NY Real-Time News) Washington -
President Barack Obama’s plan to fix the foreclosure crisis has been a dud,
putting the housing market recovery at risk. Hopes were over-inflated when
Obama unveiled the program before an adoring audience of Arizona high
school students last February. Almost a year later, it appears only about
750,000 homeowners – a fraction of the 4 million originally projected – might
complete the application process, predicts Mark Zandi, chief economist at
Moody’s Economy.com. By Rob Carr – January 15, 2010
(11) U.S. Loan Effort Is Seen As Adding To Housing Woes.
a. NEW YORK (New York Times) The Obama administration’s $75 billion
program to protect homeowners from foreclosure has been widely
pronounced a disappointment, and some economists and real estate experts
now contend it has done more harm than good. In 2008, more than 1.7
million homes were “lost” through foreclosures, short sales or deeds in lieu of
foreclosure, according to Moody’s Economy.com. This year, more than two
million homes were lost, and Economy.com expects that next year’s number
will swell to 2.4 million. By Peters.Goodman – January 2, 2010
(12) Mortgage – Aid Plan Gets Tepid Results.
a. WASHINGTON D.C. (The Wall Street Journal) Just 12% of eligible
borrowers have started trial loan modifications under the Obama
administration’s $75 billion mortgage foreclosure prevention plan, according
to a treasury report released Wednesday. The latest data comes amid
increasing concern that the effort which relies on hefty government incentives
for lenders and borrowers won’t be enough to effectively combat mounting
foreclosures across the country. By Ruth Simon/Jessica Holzer-Sept.10, 2009
(1) Borrowers should get relief now, and the banks should get a guarantee down the
road.
b. (The Wall Street Journal.) Despite the slight uptick in house prices in some
markets recently, the sales of foreclosed properties continue to dampen house
prices and weaken banks’ balance sheets. The uncertain pace of future losses
makes banks nervous about the adequacy of their capital, which discourages
bank lending and economic growth. The Obama housing plan does not solve
the problem of defaults driven by high loan-to-value ratios. Instead the
administration has pinned its hopes on lowering mortgage rates to raise house
prices and on the Public Private Investment Partnership (PPIP) to remove the
high loan-to-value mortgages from the banks’ balance sheets. But mortgage
rates have risen and the PPIP is a moribund at best. By Martin Feldstein –
August 7, 2009
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5. SECTION 3. RESEARCH INSTITUTE SAVINGS DATA
(1) Importance of housing: (Seidman Research Institute, W.P. Carey School of
Business, Arizona State University. May of 2009)
(a.) The single largest category of expenditure by households in the U.S. is
housing. Any action taken to reduce over-all housing costs will have the
greatest and quickest impact on the U.S. Economy.
(b.) On average, annual expenditures on housing by homeowners with a
mortgage is $23,018, which represents 35.3 percent of all expenditures. It is
estimated that upwards of an additional 15% of income is spent in the
marketplace by U.S. Households on related items for their home.
(c.) Housing is important to note when considering targeted policies that
attempt to stimulate spending within an economy. Most stimulus packages
typically include additional government spending and/or tax cuts. Government
spending is a direct method by which aggregate spending can increase. A tax
cut has an indirect effect on spending, increasing a household’s disposable
income and, therefore, allowing an increased level of spending.
NATIONAL AVERAGES WERE USED FOR MODEL CONCEPT
Data provided by L. William Seidman Research Institute (W.P.) Carey School of
Business, Arizona State University:
National average debt on a residence $100,904.00
National average interest rate payment @ 6.4% (monthly) $686.53
New interest rate payment @ 4% (monthly) $421.72
Monthly Savings $261.81
The above savings are based on national average data compiled by Arizona State
University in an economic report. All home owners’ savings will vary depending upon
their properties’ current debt and rate of interest payment.
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6. SECTION 4. BENEFITS
(1) The benefits to the Existing Homeowner:
(a.) A 4-percent Mortgage Payment Modification provides a residual monthly
stimulus to all qualified American home owners. The mortgage savings
allows the home owners to keep more of their income in the form of the
difference of their current mortgage interest rate and a new 4% mortgage
interest rate.
(b.) Provides increased available monthly capital to be used for investment
purposes or spent on goods and services, which will spur economic
growth every month.
(c.) Helps with the prevention of pending foreclosures, due to current high
mortgage interest rates and decreased homeowner property values.
(d.) Increases the homeowners’ confidence with additional monthly spending
capital - which creates more economic security.
(2) The Benefits to the U.S. Economy from ”Trickle-up-Economics:”
a. It is estimated conservatively that $210-$350+ billion will flow back into the
U.S economy in the first year due to the multiplier effect of “trickle-up-
economics.” (Seidman Research Institute, W.P. Carey School of Business,
Arizona State University. May of 2009). The economy is, immediately,
stimulated due to huge amounts of available capital. Money will be
systematically reinvested each month through homeowner purchases within
the marketplace. This event would be similar to a “seasonal shopping
experience” as consumers spend and invest their monthly mortgage savings.
b. Property values will stabilize and support stronger numbers as housing
demands increase. The “foreclosure epidemic” is now stopped. The housing
market improves and our nation’s economy grows.
c. Banking problems will be diminished as non-performing assets are turned
into performing assets. This will, immediately, heal balance sheets, reducing
bank-owned real estate and dramatically decreasing new foreclosures. The
foreclosure market has reached historic averages. Now, the banking industry
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7. will not have the extreme “toxic debt” burden they have endured for the past
years – it is eliminated.
d. As the job market strengthens with more people working, more goods and
services will be sold and consumed. The federal government and city and
state governments will have increased funding for their budgets helping the
overall U.S. economy with more capital.
e. As the housing market improves and the nation’s economy grows, the
commercial real estate sector will turn around. Commercial real estate will
improve due to increased demand. Historically, a housing market
improvement leads to a rebound in commercial property.
f. Welfare costs will decline across the board as the job market strengthens.
g. Fannie Mae/Freddie Mac will be stabilized…this frees up billions of dollars
from being wasted on more foreclosure losses by the government.
h. Business feeds off of business. As the job market strengthens, we will have
tremendous job creation in all sectors of the economy due to trickle-up-
economics.
(3) Benefits to the US Government from “Trickle-up-Economics:”
(a.)The federal government’s refund back to the tax payers for mortgage
interest deductions will be lower as a result of an overall lower
national interest rate which will increase federal tax revenues. It is
estimated the amount of money saved by the government is upwards
of 20% of the total cost for the program each year.
(b.)Tax revenues will increase across the board. As the job market
strengthens with more people working, more goods and services will
be sold and consumed. The federal government and city and state
governments will have increased funding for their budgets.
(c.)Job Creation will occur at a rapid pace.
(d.)The U.S. Federal Government will save on expenses, ranging from
social services like unemployment and welfare. Most importantly, the
billions of dollars in losses to Fannie Mae and Freddie Mac will be
eliminated.
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8. SECTION 5. QUALIFICATIONS
(1) Easy qualification for Existing Homeowners:
(a.) American citizens can apply for the mortgage for an enrollment period of
one year after the date of enactment. After the year has expired the rate
will no longer be available to enroll in, but will still be applicable to the
mortgages of homeowners who signed up during the one-year period.
(b.) Homeowners may be single, husband/wife, or two adult U.S. citizens.
Borrowers must be current on their mortgage, or negotiate with the lender
a net payback amount.
(c.) Homeowners do not refinance their existing lst mortgage; all terms of
their present home mortgage remain the same. The difference between
the borrower’s current interest rate and 4% could be funded by “existing
budgeted federal modification funds.” The borrower’s lender will receive
a new modified title policy (at a small fixed fee) showing the home
owner’s newly adjusted mortgage payment amount, in addition to, also,
showing the amount paid by federal funding.
(d.) All mortgage payments will be modified with no cash out, and apply to
first mortgage only, primary residence.
(e.) No appraisal is required.
(f.) Homeowners with an existing “interest only mortgage” will be treated as a
standard payment modification.
(g.) There will be one fixed cost for processing all mortgage modifications and
there are no discount points or junk fees. Costs will be kept at a
minimum.
(h.) A single family residence can be on a lot up to 20 acres, which must be
protected by CC&R’s/deed and cannot be subdivided.
(i.) If homeowners modify their mortgage payment to a 4% modification and
then default, they cannot qualify for any other 4 For Freedom mortgage
programs of any kind in the future.
(j.) If a homeowner’s primary residence is debt free, the applicant can qualify
(up to $250,000) for an additional second home. A vacation, second
home, or a rental income property can apply as outlined under “easy
qualify” for new home purchases.
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9. (k.) With the 4% mortgage payment modification the borrower cannot place
additional future liens (OF ANY KIND) on the property as long as the
modified mortgage payment plan is in place.
SECTION 6. ESTIMATED INVESTMENT COST
(1) Economic investment of the “4-percent Mortgage Payment Modification”:
(a.)The estimated national economic benefit effect is a conservative 300% -
500% yearly return on every dollar homeowners save on their mortgages.
(Seidman Research Institute, W.P. Carey School of Business, Arizona
State University. May of 2009).
(b.) Note: The Seidman Research Institute report was done to obtain data
regarding benchmark estimates in cost for a national 4% mortgage
program. The data was used to establish program economic costs,
anticipated absorption, and to establish the estimated three-to-five
economic multiplier effect which is created by trickle-up-economics.
(c.)It is estimated that over 50% of all “4-perecnt Mortgage Payment
modifications” will be retired in the first six years due to refinancing or
the homeowner’s property being sold. (Seidman Research Institute, W.P.
Carey School of Business, Arizona State University. May of 2009).
(d.)The first year of the program requires the most amount of funding which
is conservatively estimated at $70 billion dollars. Due to the trickle-up-
multiplier effect (300% to 500% yearly return) the program it is designed
to create huge amounts of capital which pays for itself many times over
each year. The program starts slowing yearly in economic growth activity
as the mortgage payment modifications are removed, which will reduce
some of the multiplier effect of trickle-up-economics. It is anticipated that
more than 50% of the “mortgage payment modifications” will be retired in
six years. The continued economic growth activity of the program should
have a lasting impact exceeding more than fifteen years.
(e.)Funding for “the mortgage payment modification” is jump-started by
existing government budgeted funds which have already been allocated
for home mortgages modification use.
(f.) Huge amounts of proceeds are generated monthly from the extra revenues
being created (a three- to-five economic multiplier effect) by trickle-up-
economics All generated government proceeds will first go towards
program costs, with the balance then used to pay down the national debt.
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10. SECTION 7. NATIONAL ECONOMIC GUIDELINES
(1) This Bill is to be expanded providing a national budget and the opportunity by
congress to freeze all current federal expense budgets for a minimum of two-years
from the enactment date.
(2) All excess revenues generated (through the federal government) as a result of the 4
For Freedom program will be used to pay down the U.S. national debt.
(3) All future U.S. home mortgages are to be “income debt/ratio driven” to determine
each applicant’s mortgage eligibility through federal law.
(4) The entire program, 4 For Freedom, was designed to be strict and to stabilize the U.S
housing and mortgage markets - while at the same time creating jobs and
encouraging spending in the public square/marketplace.
(5) It is anticipated that real estate values on an average could increase upwards of 20%
over the first two years as home purchasers take advantage of the 4%-30-Year Home
Purchase Mortgage. There should be an additional increase in home values each
following year as the “4-percent Mortgage Payment Modification” starts benefiting
the economy. The anticipated economic correction in the housing sector is badly
needed and will be a welcomed relief in the American marketplace. A future
“housing bubble” cannot be created because of the following reasons: the
FREEDOM Home Mortgage program is debt-ratio driven, it is a one-time program,
it expires on its own, houses cannot be “flipped,” the program is conservative in
design, it is easy to implement, 1st
mortgages are applicable only (the strict credit
guidelines prevents other liens), and you must be a U.S. citizen with your
“FREEDOM Home Mortgage” as a primary residence.
(6) NOTE: All investors who purchase FREEDOM Home-purchase Mortgage paper
from the Freedom Funding Company, will receive the income on their investment as
being tax free, retro active from the date of their investment.
SECTION 8, STATEMENT OF FACT
Housing drives the U.S. Economy – it always has and always will. We must “fix
housing first” if we are to recover from the crisis facing our nation today. It is a fact that
since the Great Depression there have been 14 recessions and until housing recovered,
America did not recover from any of these recessions. FHA was created during the Great
Depression and, again, was extended for use after World War II. Our nation is at a cross
roads, and we, again, have a critical need for a national mortgage program as outlined in
the Bill, “4 For Freedom Act of 2014.”
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