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It is right out of the exotic mortgage handbook!
25% property-tax deferral proposed
OLYMPIA — State lawmakers during a special session Thursday will consider helping struggling homeowners by letting households earning up to $57,000 a year defer part of their property tax.
Okay, you still owe the money but you don't have to pay right away?
Homeowners also would have to pay interest on the deferred tax. The interest would be based on federal rates. Gregoire said people would pay about 7 percent interest currently.
People can't afford to pay today? The plan to help them involves charging them interest far exceeding their likely wage increases? Seriously? And why is the word "currently" used? Does that mean this interest is an adjustable rate?
Perhaps our government doesn't fully understand the concepts of debt management.
ICE: Mortgage Delinquency Rate Increased Year-over-year in October
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From ICE: ICE First Look at Mortgage Performance: Serious delinquencies hit
17-month high while foreclosure activity remains historically muted
• At 3.45% ...
2 hours ago
9 comments:
Mark, that seems a sure fire way to make sure there is an increase in defaults down the line. Depreciating property price with increasing loan and tax bill. Back in the early 80's many people walked instead of trying to refinance inot a losing proposition. Ugh I just heard Liesman on CNBC saying that Fed Kohn is talking of a weaker dollar not being bad for the US economy. not
The above was me.
TG
As a quasi-Georgist I actually think this is (possibly) part of a saner tax regime. Washington state already doesn't have an income tax, and if you believe us Georgists, most economics will agree that taxing land values is the least distortive tax.
The age-old criticism of Georgism is the "Old Widow Jones" issue of the pensioner being forced out of her home by rising land values [Churchill in his Liberal Party days brings this up even]; tacking these property taxes onto the estate removes this (very fair) criticism completely.
TG,
If a weaker dollar is not bad for the US economy, just think how good it will be for us if we send the dollar down to zero! The stock market would certainly love it.
To infinity, and beyond! - Buzz Lightyear
Troy,
I don't have a gripe with property taxes.
I also don't have a gripe with the tax deferral nature of the relief.
I do have a gripe with the arguably punitive 7% interest rate though. Had the interest rate been designed to actually offer relief, say closer to the CPI's rate of increase or the expected increase in wages, I'd be fine with it. As it is proposed though, it just seems like yet another way for people to extract equity from their homes in a most unsustainable manner (with the government playing the role of the home equity withdrawal profiteer hoping to make a few extra percent on the deal).
You won't see me paying the government ~7% long-term while investing the difference in three month treasury bills yielding just ~3%. Perhaps that was the point of its punitive nature. The government wanted to insure that the only people who would take the deal were those who could least afford the deal.
Just my two cents. Thanks for the comments!
I wonder if there is a way I could roll it into my interest only, no doc, 50 year mortgage...........
While we were busy building housing & condo developments, Home Depot's, Lowe's, Starbuck's on every corner it called for more police, fire teachers etc. We didn't pay attention to the increased burdens on our towns/cities coz our home values were going up faster than you could say, I'll take that Pearl White Escalade with 22" Giovanna rims please. How much left on my HELOC?
Now our values are dropping but we still need, or think we need, the services from our local and state government while revenues are in decline.
MarkD,
Thank goodness we can extract equity from our homes without actually having to sell any of it.
Imagine how hard it would be if you had to extract equity the old-fashioned way.
Perhaps that will become popular once again though at some point. There's nothing quite like the thrill of selling the front door to your house on EBay. Got blue tarp?
yeah, 7% is WAAY too high. Here in Cali a similar program is ~3%. 6mo t-bill would be about right I guess.
Troy,
Anything above the ~6.2% current 30-year conventional mortgage rate seems punitive to me if it is truly is intended to help "struggling homeowners."
They say options are always better than no options, so it obviously offers some help even at 7%.
However, the same could be said about 20% interest rates.
Why stop there though. Make it 50%! Granted, the help has been drastically reduced, but nobody's forcing people to accept the help. *sarcasm*
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