January 20 can't come soon enough for the Treasury department.
This new proposal is great for Realtors and homebuilders, as you only get the low rates for new purchases. To get a 4.5% mortgage, my neighbor and I will have to buy each other's houses and move next door, since we can't get this rate by refinancing and staying put. Not surprisingly, this proposal is heavily backed by the Realtors.
It is also a homebuying subsidy that will be politically very hard to take away once it is in place.
The real impact of this proposal will be to put a chill on home sales for a few weeks while buyers wait to see if they can cash in on this new goodie. Like the original TARP, Paulson will eventually change his mind and avoid doing the wrong thing in the long-run. Yet another flip-flop that produces uncertainty and undermines trust in the Treasury. I look forward to a Treasury secretary that gets things right the first time.
Please give us a foreclosure prevention plan that encourages principal write-downs for owner-occupants who can qualify for a mortgage at their homes' current market value. That will stabilize the housing market and protect neighborhoods, but it won't generate Realtor commisions.