A Few Steps to Jumpstart the Economy

I am in the process of trying to refinance my mortgage at these historically low rates and it seems to me there are a few fairly easy steps that can be taken to make the process easier. This would be a tremendous boost to the economy and the housing market as more money would be freed up for people to spend as their interest rates and mortgage payments are lowered. The main problem is that even though rates are very low it is very difficult to qualify for a mortgage or a refinance. The banks have overcompensated for their previous laxity by creating an environment where getting approved for a loan is near impossible. Even a person with excellent credit who has been paying the mortgage bill on time for years has difficulty getting approved. How ridiculous is that? The refinanced mortgage will result in a lower payment and the individual has already demonstrated the ability to pay on time for years at a higher level. Isn't it less risky he/she will default at a lower mortgage payment. This is where government can step in and do something useful for the homeowner and the economy. There should be a national program to be able to refinance your home loan at current interest rates with very few qualifications and no cash out.

My next gripe is title insurance. The entire concept is ridiculous. In order to refinance I am required to have a title search on my property that only I have owned for the last 13 years. The title search is basically a few clicks on the Internet to look to see if there are any liens on the property. To make it worse if the "person" doing the title search is in error I have to pay title insurance to cover for his error. This is parallel to me charging a person my fee for a doctors visit and then charging an additional fee to pay for my malpractice insurance. Additionally title insurance fees are set by regulators when it should be market based and allowed to float like other insurance products. This entire industry of title search/insurance is a hindrance to refinancing property and needs to be adjusted. The problem is they are typically owned by lawyers. Need I say more.

Another innovation could be that a person could take out a mortgage at theses low rates with the condition that he could later sell the property with the mortgage as a package. In other words, the buyer would assume the mortgage of the seller. Locking in a low rate would significantly increase the value of the property to a potential buyer. This simple innovation would trigger rapid investment in the overhanging supply of houses as investors would predict a gain not only in the underlying property but also the increased value of a low interest rate mortgage which they could pass on to the buyer. Of course the buyer would have to qualify with the bank prior to the transition.

These three steps would dramatically spur the real estate market. They would also free up much needed cash flow in people's pockets to be able to spend more and invigorate the economy. It would also trigger job creation within the mortgage and construction industries. The only losers are the lawyers and therefore a perfect plan.