As of this writing, it looks like Republicans will occupy the Senate while Democrats will have the White House and a majority in the House of Representatives. Assuming these findings are valid, I offer here some educated speculation regarding the effects these changes in government leadership will have on three critical housing issues: mortgage forbearance, student loan debt and GSE guardianship.
First, with regard to forbearance: contrary to the predictions of the real estate bubble boys (which, I should add, smelled in 2020 more than any cult crash group in history), the number of owners who participate in forbearance plans dwindle over the months. Maybe these brethren of abstention accident spoken too early?
As more homeowners find new jobs and more jobs are added to the economy, more and more people are coming out of forbearance. We recently recovered over 12 million jobs and we still need 10 million more before we return to employment levels in British Columbia (before COVID-19). Given that we have a long way to go to return to the employment levels we had before the COVID crisis, I believe the forbearance plans will be fully extended in 2021.
In my opinion, an extension of the abstention plans would have taken place regardless of who won the White House. The housing market has been a critical sector during this recovery from the COVID-19 lows. This is another fact the forbearance crash brothers forgot to take into account when they marketed a housing crash in 2021 on social media sites.
Student debt is another hot issue that will likely be addressed by the new administration. Last year I wrote a detailled plan to responsibly alleviate some of the country’s student debt. If you are a reader of my work then you know that I have always argued that the student debt crisis is mostly overstated when it comes to the damage it is causing to the housing market.
In my opinion, government coffers would be better spent on helping those who never had the chance to go to university. We have seen the great success of giving money to the people who need it most and who should care less about Americans who graduate and earn between $ 2 million and $ 5 million in their lifetime.
Rumors say Democratic leaders will ask Biden to write a decree to write off up to $ 50,000 in student debt per debt holder. And no, we won’t have to raise a dime in taxes to make that happen. Funding for this amortization program will simply add to the deficit. My recommendation is for a more modest approach. As I stated in my college debt relief proposal, forgetting just $ 17,000 in debt per debt holder would cancel the obligation of a majority of student loan debt holders in America.
The story of tuition fees and student debt is more complicated than just forgiveness of debt.
What does this mean for college students in the future? What does this mean for those who worked in college and then paid off their debts as promised? It is complicated. Only if we look at this one-time cancellation as part of COVID-19 disaster relief assistance does it make sense to move forward with this now and deal with the complications then. that this will entail in the future.
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But later on, we’ll need a more detailed plan to resolve any “fairness” issues that this raises.
Let’s be clear. We were very fortunate that Fannie Mae and Freddie Mac remained in guardianship before and during the COVID crisis. This red flag related to the COVID crisis has put a question mark on whether we should even have a plan to privatize them.
We have just had the longest economic and job expansion on record in history, and without COVID-19, the expansion would still happen. During this period, the financial profiles of home mortgage holders looked excellent after 2010. Even in this context, the COVID crisis had the potential to hurt the housing market by shutting down credit.
One of the great economic successes of the COVID-19 crisis has been that credit has never been tight and the loan market has remained stable in America. Additionally, government-backed forbearance plans have allowed struggling homeowners to stay in their homes, which has stabilized the market.
None of these things could have happened so effectively if GSEs were publicly traded for-profit institutions whose primary duty was to shareholders without government support. When someone says these giants should go public, ask them what would have happened to the market during COVID-19 if GSEs were out of wardship without government support.
We have been through a lot as a country this year. As of this writing, the 10 year yield is 0.82%. We’re so close to being above 1%, the final indicator in my model that America is back. We are getting there. Until then, be careful and make sure you take care of yourself and your family members.