Ron Paul is our pick to go up against Obama. Nobody else has a shot to accomplish what he can.
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Who is Ron Paul
Ronald Ernest "Ron" Paul (born August 20, 1935) is an American physician, author, Republican United States Representative, and a candidate for the 2012 Republican Party presidential nomination. He has been an outspoken critic of American foreign and monetary policies, recognized for sharply opposing his own party on many issues. Since 1997, Paul has represented Texas's 14th congressional district, which covers an area south and southwest of Houston that includes Galveston. Paul serves on the House Committees on Foreign Affairs and Financial Services, and on the Joint Economic Committee, as well as chairman of the Financial Services Subcommittee on Domestic Monetary Policy and Technology.
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A native of Pittsburgh, Pennsylvania, Paul is a graduate of Gettysburg College and Duke University School of Medicine, where he earned his medical degree. He served as a flight surgeon in the United States Air Force from 1963 until 1968. He worked as an obstetrician-gynecologist during the 1960s and 1970s, delivering more than 4,000 babies, before entering politics in 1976.
Following his 2008 run for the Republican Party presidential nomination, Paul became the initiator of the advocacy group Campaign for Liberty and his ideas have been expressed in numerous published articles and books, including Liberty Defined: 50 Essential Issues That Affect Our Freedom (2011), End The Fed (2009), The Revolution: A Manifesto (2008), Pillars of Prosperity (2008), A Foreign Policy of Freedom: Peace, Commerce, and Honest Friendship (2007), and The Case for Gold (1982). His son Rand Paul was elected to the United States Senate for Kentucky in 2010, making the elder Paul the first Representative in history to serve concurrently with a child in the Senate. Paul has been characterized as the "intellectual godfather" of the Tea Party movement. He has become well known for his libertarian ideas on many political issues, often differing from both Republican and Democratic Party stances.
On July 12, 2011, Paul announced that he would not seek another term in Congress in order to focus on his presidential bid. He campaigned for President of the United States twice before, first during 1988 as the nominee of the Libertarian Party and again during 2008 as a candidate for the Republican nomination.
Rumor has it he will Run as an Independent if he does not win the GOP candidacy.
WASHINGTON (AP) — On jobs and taxes, the top Republican presidential rivals are locked in a fierce game of one-upmanship. They're all trying to outdo each other in offering the boldest economic plan for the campaign to unseat President Barack Obama next November.
Despite some notable differences in the blueprints, they all are built around the central theme that Obama's stimulus programs haven't worked and his job creation record is dismal. Example No. 1: Unemployment is holding at a painfully high 9.1 percent.
"We knew ultimately that the 2012 election was going to be a big referendum on the president," said Douglas Holtz-Eakin, former director of the Congressional Budget Office who was the chief economic adviser to Arizona Sen. John McCain's 2008 presidential campaign. "But Republicans also have to say what they would do. It's not enough to say we don't like what's going on."
Texas Gov. Rick Perry teased rival Herman Cain — "I'll bump plans with you, brother" — when both rolled out ambitious proposals for a single-rate flat tax. That's a concept hailed by numerous Republicans and some Democrats for its simplicity, yet it never has managed to attract much congressional support. Former Massachusetts Gov. Mitt Romney is the lone major GOP contender not calling for a flat or flatter tax.
The 2012 contenders also are serving up a platter of familiar conservative fare: calls for deep spending cuts, reduced government regulation and an emphasis on private enterprise as the true engine of job growth and prosperity.
The plans underscore the party's attempt to respond to the biggest voter concerns of the day and capitalize on what they see it as Obama's chief vulnerability, the still shaky recovery. The candidates claim their various plans would help create millions of private sector jobs; just how is not always clear.
With polls showing that most people support increasing taxes on the wealthiest households, as Obama and Democrats are proposing, the GOP flat-tax plans would largely end up as a boon to the wealthiest, independent analyses suggest.
The tax debate coincides with spreading protests, inspired by the Occupy Wall Street movement, against economic inequality. The nonpartisan Congressional Budget Office recently reported the top 1 percent of American earners doubled their share of national income over the past 30 years, to 20 percent.
Some of the GOP plans show depth, complexity and sophistication, Holtz-Eakin said. Not every economist is as charitable or sees the GOP offerings as workable.
"I don't think any of the plans can be taken too seriously as actual policy," said Bruce Bartlett, who held top economic posts in the Ronald Reagan and George H.W. Bush administrations but now considers himself a political independent.
"The Republican goal is to nominate the person who is the most committed, most articulate in terms of the Republican philosophy. What they're competing for is who best represents that core philosophy and articulate it in a way that the base finds satisfying," Bartlett said.
No matter that some GOP dogma, such as an insistence that cuts in business taxes and government regulation will spur private-sector job growth, "is economic nonsense," Bartlett said.
All the GOP rivals would pare federal regulations.
Rep. Michele Bachmann, R-Minn., would kill the Environmental Protection Agency and repeal the 2010 Dodd-Frank financial industry regulation law. Romney is proposing a 10 percent cut in the federal workforce. Former Pennsylvania Sen. Rick Santorum wants to repeal all regulations put in place by Obama. "The federal government kills jobs. We don't need more programs and bureaucrats telling business how to operate," he says.
Economists generally agree the shortage of jobs isn't caused by government overregulation but by a lack of consumer demand. A recent Labor Department survey showed that less than 1 percent of all layoffs in the past four years have been attributed by employers to government regulation.
With consumer spending driving two-thirds of the U.S. economy, those without jobs have little money to spend. Many with jobs fear losing them, or their houses are worth less than their mortgages, so they have little spare cash or borrowing ability.
Killing off Obama's health care overhaul is a common feature of the GOP plans. So, too, is a proposal to offer American companies a chance to bring money generated overseas back into the U.S. without being taxed. But studies have shown that a similar repatriation "holiday" in 2004-2005 had little effect on job growth.
Some Republicans go further than others. For instance, Bachmann says she would consider allowing oil and gas exploration in the Florida Everglades. None of her rivals has been that bold, perhaps given Florida's importance in presidential calculus.
Hoping to coax more U.S. export jobs, Romney threatens to trade penalties against China if it does not boost the value of its currency. "If you're not willing to stand up to China, you'll get rolled over by China," he says. But former Utah Gov. Jon Huntsman, who recently served as U.S. ambassador to China, argues that such penalties probably would lead to a trade war that would hurt both economies.
On taxes, Romney would make incremental changes and move later to a simpler system. For now, he would extend Bush-era tax cuts, lower the 35 percent corporate tax rate to 25 percent and exempt investment income for those earning less than $200,000. He would extract more U.S. oil, coal and natural gas, expand trade pacts and cut federal spending.
Rep. Ron Paul's plan is the most radical. The Texas Republican, a libertarian, would scrap the income tax entirely. He contends the government didn't have the authority to impose it in the first place. He would make ends meet through excise taxes, tariffs, and a smaller government. In the process, he would abolish the Internal Revenue Service and the Federal Reserve.
Cain, the former Godfather's Pizza CEO who has replaced Romney as the GOP front-runner in some recent polls, repeatedly pushes his "9-9-9" tax plan that would cut personal and corporate tax rates to 9 percent each and impose a new 9 percent federal sales tax.
Perry's plan would give taxpayers the choice of paying at a flat rate of 20 percent or adhering to the current tax structure. He would preserve deductions for mortgage interest, charitable donations and state and local tax taxes for households earning less than $500,000 a year and offer a $12,500 exemption for individuals and dependents.
Former House Speaker Newt Gingrich has proposed a 15 percent optional flat tax. Huntsman would set up a three-tiered system with a top rate of 23 percent. Bachmann would replace the tax code with a yet-to-be specified flat tax. Santorum proposes a "simpler, flatter and fairer" tax without offering specifics. He would cut the corporate tax in half and eliminate it for manufacturers who keep jobs in the U.S.
In the past, flat tax schemes — pushed by Democrat Jerry Brown in 1992 and Republican publisher Steve Forbes in 1990 and 2000 — failed to generate much political traction, in part because most plans would put a disproportionate burden on lower-income families.
Quick studies of the current major GOP proposals by independent research groups have made similar findings.
____
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The Senate called a special Saturday debate session for February 7 at the urging of President Obama. The Senate voted, 61-36 (with 2 not voting) on February 9 to end debate on the bill and advance it to the Senate floor to vote on the bill itself.[15] On February 10, the Senate voted 61-37 (with one 1 not voting)[16] All the Democrats voted in favor, but only three Republicans voted in favor (Susan Collins, Olympia Snowe, and Arlen Specter).[17] At one point, the Senate bill stood at $838 billion.[18] US President
[edit] Comparison of the House, Senate and Conference versions US President
Senate Republicans forced a near unprecedented level of changes (near $150 billion) in the House bill which had more closely followed the Obama plan. The biggest losers were States[19] (severely restricted Stabilization Fund) and the low income workers (reduced tax credit) with major gains for the elderly (largely left out of the Obama & House plans) and high income tax-payers. A comparison of the $827 billion economic recovery plan drafted by Senate Democrats with a $820 billion version passed by the House and the final $787 billion conference version shows huge shifts within these similar totals. Additional debt costs would add about $350 billion or more over 10 years. Many provisions will expire in two years.[20]
The main funding differences between the Senate bill and the House bill are: More funds for health care in the Senate ( $153.3 vs $140 billion), for green energy programs ($74 vs. $39.4 billion), for home buyers tax credit ($35.5 vs. $2.6 billion), new payments to the elderly and a one year increase in AMT limits. The House has more funds appropriated for education ($143 vs. $119.1 billion), infrastructure ($90.4 vs. $62 billion) and for aid to low income workers and the unemployed ($71.5 vs. $66.5 billion).[21]
[edit] Spending (Senate-$552 billion, House-$545 billion) 2012, us president, herman cain, 2012 election, obama sucks, george w bush, why obama sucks, the next president, i hate obama, obama sucks, Mit Romney, sarah palin, donald trump, barack obama, mit romney, newt gingrich, ralph nader, gop, obama sucks t-shirts, George Bush, Bush, new need a better president, the next us president, 2012 election, 2012 presidental race, 2012 president
Aid to low income workers and the unemployed
Senate - $47 billion to provide extended unemployment benefits through Dec. 31, increased by $25 a week, and provide job training; $16.5 billion to increase food stamp benefits by 12 percent through fiscal 2011 and issue a one-time bonus payment; $3 billion in temporary welfare payments.
House — Comparable extension of unemployment insurance; $20 billion to increase food stamp benefits by 14 percent; $2.5 billion in temporary welfare payments; $1 billion for home heating subsidies and $1 billion for community action agencies.
Direct cash payments
Senate — $17 billion to give one-time $300 payments to recipients of Supplemental Security Income and Social Security, and veterans receiving disability and pensions.
House — $4 billion to provide a one-time additional Supplemental Security Income and Social Security Disability Insurance payment to the elderly, of $450 for individuals and $630 for married couples.
Conference - $250 one-time payment to each recipient of Supplemental Security Income, Social Security (Regular & Disability) Insurance, Veterans pension, Railroad Retirement, or State retirement system.[22] US President
Infrastructure
Senate — $46 billion for transportation projects, including $27 billion for highway and bridge construction and repair and $11.5 billion for mass transit and rail projects; $4.6 billion for the Army Corps of Engineers; $5 billion for public housing improvements; $6.4 billion for clean and drinking water projects.
House — $47 billion for transportation projects, including $27 billion for highway and bridge construction and repair and $12 billion for mass transit, including $7.5 billion to buy transit equipment such as buses; and $31 billion to build and repair federal buildings and other public infrastructures.
Health care
Senate — $21 billion to subsidize the cost of continuing health care insurance for the involuntarily unemployed under the COBRA program; $87 billion to help states with Medicaid; $22 billion to modernize health information technology systems; and $10 billion for health research and construction of National Institutes of Health facilities.
House — $40 billion to subsidize the cost of continuing health care insurance for the involuntarily unemployed under the COBRA program or provide health care through Medicaid; $87 billion to help states with Medicaid; $20 billion to modernize health information technology systems; $4 billion for preventative care; $1.5 billion for community health centers; $420 million to combat avian flu; $335 million for programs that combat AIDS, sexually transmitted diseases and tuberculosis.
Conference - A 65% COBRA subsidy for 9 months will apply to workers laid off between Sept. 1, 2008 and Dec. 31, 2009. Those already laid off have 60 days to apply for COBRA.[23]
Education
Senate — $55 billion in state fiscal relief to prevent cuts in education aid and provide block grants; $25 billion to school districts to fund special education and the No Child Left Behind K-12 law; $14 billion to boost the maximum Pell Grant by $400 to $5,250; $2 billion for Head Start.
House — Similar aid to states and school districts; $21 billion for school modernization; $16 billion to boost the maximum Pell Grant by $500 to $5,350; $2 billion for Head Start.
Conference - The Conference Report merged most education aid with the State Fiscal Stabilization fund (administered by the Department of Education)and gave power over the funds to each governor under voluminous restrictions. The Governor is "Required" to spend $45 billion of the money on education to restore funding to 2008 levels but the mechanisms to enforce state maintenance of effort at 2005-06 levels are complex and potentially impossible to implement.[24] Hard hit states such as Nevada cannot possibly find enough funds to get to the 2005-06 state funding levels for education.[25] Some states with no current budget cuts for education, such as Arkansas and North Carolina, may get nothing.[26] This will result in a monumental 50 state legal and political fight over how to re-budget to best take advantage of the Federal legislation. Many states will further reduce state funds for education to the 2005-06 minimum so these state resources can be used for other state priorities and the net gain for education will be far less than the total Federal appropriation.
Energy
Senate — $40 billion for energy efficiency and renewable energy programs, including $2.9 billion to weatherize modest-income homes; $4.6 billion for fossil fuel research and development; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called smart electricity grid to reduce waste; $8.5 billion to subsidize loans for renewable energy projects; and $2 billion for advanced battery systems.
House — $28.4 billion for energy efficiency and renewable energy programs, including $6.2 billion to weatherize homes; $11 billion to fund a smart electricity grid.
Homeland security
Senate — $4.7 billion for homeland security programs, including $1 billion for airport screening equipment and $800 million for port security.
House — $1.1 billion, including $500 million for airport screening equipment.
Law enforcement
Senate — $3.5 billion in grants to state and local law enforcement to hire officers and purchase equipment.
House — Comparable provision.
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[edit] Taxes ($275 billion)
New tax credit
House— About $145 billion for $500 per-worker, $1,000 per-couple tax credits in 2009 and 2010. For the last half of 2009, workers could expect to see about $20 a week less withheld from their paychecks starting around June. Millions of Americans who don’t make enough money to pay federal income taxes could file returns next year and receive checks. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.
Senate — The credit would phase out at incomes of $70,000 for individuals and couples making more than $140,000 and phase out more quickly, reducing the cost to $140 billion.
Conference- Tax Credit reduced to $400 per worker and $800 per couple in 2009 and 2010 and phaseout begins at $75,000 for individuals and $150,000 for joint filers. Note retirees with no wages get nothing.[27]
Alternative minimum tax
House — No provision.
Senate — About $70 billion to prevent 24 million taxpayers from paying the alternative minimum tax in 2009. The tax was designed to make sure wealthy taxpayers can’t use credits and deductions to avoid paying any taxes or paying at a far lower rate than would otherwise be possible. But it was never indexed to inflation, so critics now contend it taxes people it was not intended to. Congress addresses it each year, usually in the fall.
Conference - Includes a one year increase in AMT floor to $70,950 for joint filers for 2009.[27]
Expanded child credit
House — $18.3 billion to give greater access to the $1,000 per-child tax credit for low income workers in 2009 and 2010. Under current law, workers must make at least $12,550 to receive any portion of the credit. The change eliminates the floor, meaning more workers who pay no federal income taxes could receive checks.
Senate — Sets a new income threshold of $8,100 to receive any portion of the credit, reducing the cost to $7.5 billion.
Conference - The income floor for refunds was set at $3,000 for 2009 & 2010.[28]
Expanded earned income tax credit
House — $4.7 billion to increase the earned income tax credit — which provides money to low income workers — for families with at least three children.
Senate — Same.
Expanded college credit
House — $13.7 billion to provide a $2,500 expanded tax credit for college tuition and related expenses for 2009 and 2010. The credit is phased out for couples making more than $160,000.
Senate — Reduces the amount that can be refunded to low-income families that pay no income taxes, lowering the cost to $13 billion.
Homebuyer credit
House — $2.6 billion to repeal a requirement that a $7,500 first-time homebuyer tax credit be paid back over time for homes purchased from Jan. 1 to July 1, unless the home is sold within three years. The credit is phased out for couples making more than $150,000.
Senate — Doubles the credit to $15,000 for homes purchased for a year after the bill takes effect, increasing the cost to $35.5 billion.
Conference - $8,000 credit for all homes bought between 1/1/2009 and 12/1/2009 and repayment provision repealed for homes purchased in 2009 and held more than three years.[28]
Home energy credit
House — $4.3 billion to provide an expanded credit to homeowners who make their homes more energy-efficient in 2009 and 2010. Homeowners could recoup 30 percent of the cost up to $1,500 of numerous projects, such as installing energy-efficient windows, doors, furnaces and air conditioners.
Senate — Same.
Conference - Same;
Unemployment
House — No similar provision.
Senate — $4.7 billion to exclude from taxation the first $2,400 a person receives in unemployment compensation benefits in 2009. Sarah Palin
Conference—Same as Senate
Bonus depreciation
House — $5 billion to extend a provision allowing businesses buying equipment such as computers to speed up its depreciation through 2009.
Senate — Similar.
Money losing companies
House — $15 billion to allow companies to use current losses to offset profits made in the previous five years, instead of two, making them eligible for tax refunds.
Senate — Allows companies to use more of their losses to offset previous profits, increasing the cost to $19.5 billion.
Conference - Limits the carry-back to small companies, revenue under $5 million [29]
Government contractors
House — Repeal a law that takes effect in 2011, requiring government agencies to withhold three percent of payments to contractors to help ensure they pay their tax bills. Repealing the law would cost $11 billion over 10 years, in part because the government could not earn interest by holding the money throughout the year.
Senate — Delays the law from taking effect until 2012, reducing the cost to $291 million.
Energy production
House — $13 billion to extend tax credits for renewable energy production.
Senate — Same.
Conference - Extension is to 2014. 2012 Election
Repeal bank credit
House — Repeal a Treasury provision that allowed firms that buy money-losing banks to use more of the losses as tax credits to offset the profits of the merged banks for tax purposes. The change would increase taxes on the merged banks by $7 billion over 10 years.
Senate — Same.
Bonds
House — $36 billion to subsidize locally issued bonds for school construction, teacher training, economic development and infrastructure improvements.
Senate — $22.8 billion to subsidize locally issued bonds for school construction, industrial development and infrastructure improvements.
Auto sales
House — No similar provision.
Senate — $11 billion to make interest payments on most auto loans and sales tax on cars deductible.
Conference - $2 billion for deduction of sales tax, not interest payments phased out for incomes above $250,000.[30]
[edit] Conference report, Sarah Palin
Congressional negotiators that they had completed the Conference Report on February 11.[31] On February 12, House Majority Leader Steny Hoyer scheduled the vote on the bill for the next day, before wording on the bill's content had been completed and despite House Democrats having previously promised to allow a 48-hour public review period before any vote. The Report with final handwritten provisions was posted on a House website that evening.[32][33] On February 13, the Report passed the House, 246-183, largely along party lines with all 246 Yes votes given by Democrats and the Nay vote split between 176 Republicans and 7 Democrats.[1][9][34]
The Senate passed the bill, 60-38, with all Democrats and Independents voting for the bill along with three Republicans.
[edit] Provisions of the Act
Section 3 of ARRA listed the basic intent behind crafting the proposal. This Statement of Purpose included the following:
To preserve and create jobs and promote economic recovery. US President, 2012 Election
To assist those most impacted by the recession.
To provide investments needed to increase economic efficiency by spurring technological advances in science and health.
To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.
To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.
Composition of the Act:,Sarah Palin
Tax cuts - includes $15 B for Infrastructure and Science, $61 B for Protecting the Vulnerable, $25 B for Education and Training and $22 B for Energy, so total funds are $126 B for Infrastructure and Science, $142 B for Protecting the Vulnerable, $78 B for Education and Training, and $65 B for Energy.
State and Local Fiscal Relief - Prevents state and local cuts to health and education programs and state and local tax increases.The Act specifies that 37% of the package is to be devoted to tax cuts equaling $288 billion and $144 billion or 18% is allocated to state and local fiscal relief (more than 90% of the state aid is going to Medicaid and education). 45% or $357 billion is allocated to federal social programs and federal spending programs.
The following are details to the different parts of the final bill[35][36][37][38]: 2012 Election, Sarah Palin
[edit] Tax cuts
Total: $288 billion
Total: $237 billion
$116 billion: New payroll tax credit of $400 per worker and $800 per couple in 2009 and 2010. Phaseout begins at $75,000 for individuals and $150,000 for joint filers.[27]
$70 billion: Alternative minimum tax: a one year increase in AMT floor to $70,950 for joint filers for 2009.[27]
$15 billion: Expansion of child tax credit: A $1,000 credit to more families (even those that do not make enough money to pay income taxes).
$14 billion: Expanded college credit to provide a $2,500 expanded tax credit for college tuition and related expenses for 2009 and 2010. The credit is phased out for couples making more than $160,000.
$6.6 billion: Homebuyer credit: $8,000 refundable credit for all homes bought between 1/1/2009 and 12/1/2009 and repayment provision repealed for homes purchased in 2009 and held more than three years. This only applies to first-time homebuyers.[39]
$4.7 billion: Excluding from taxation the first $2,400 a person receives in unemployment compensation benefits in 2009.
$4.7 billion: Expanded earned income tax credit to increase the earned income tax credit — which provides money to low income workers — for families with at least three children.
$4.3 billion: Home energy credit to provide an expanded credit to homeowners who make their homes more energy-efficient in 2009 and 2010. Homeowners could recoup 30 percent of the cost up to $1,500 of numerous projects, such as installing energy-efficient windows, doors, furnaces and air conditioners.
$1.7 billion: for deduction of sales tax from car purchases, not interest payments phased out for incomes above $250,000.
[edit] Tax cuts for companies
Total: $51 billion 2012 Election
$15 billion: Allowing companies to use current losses to offset profits made in the previous five years, instead of two, making them eligible for tax refunds.
$13 billion: to extend tax credits for renewable energy production (until 2014).
$11 billion: Government contractors: Repeal a law that takes effect in 2012, requiring government agencies to withhold three percent of payments to contractors to help ensure they pay their tax bills. Repealing the law would cost $11 billion over 10 years, in part because the government could not earn interest by holding the money throughout the year.
$7 billion: Repeal bank credit: Repeal a Treasury provision that allowed firms that buy money-losing banks to use more of the losses as tax credits to offset the profits of the merged banks for tax purposes. The change would increase taxes on the merged banks by $7 billion over 10 years.
$5 billion: Bonus depreciation which extends a provision allowing businesses buying equipment such as computers to speed up its depreciation through 2009.
[edit] Healthcare
More than 11% of the total bill is allocated to help states with MedicaidTotal: $147.7 billion,2012 Election
$86.6 billion for Medicaid US President
$24.7 billion to provide a 65 percent subsidy of health care insurance premiums for the unemployed under the COBRA program
$19 billion for health information technology
$10 billion for health research and construction of National Institutes of Health facilities
$1.3 billion for medical care for service members and their families (military)
$1 billion for prevention and wellness
$1 billion for the Veterans Health Administration
$2 billion for Community Health Centers
$1.1 billion to research the effectiveness of certain healthcare treatments
$500 million to train healthcare personnel
$500 million for healthcare services on Indian reservations ,2012 Election
[edit] Education
Total: $90.9 billion
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$44.5 billion in aid to local school districts to prevent layoffs and cutbacks, with flexibility to use the funds for school modernization and repair (State Equalization Fund)
$15.6 billion to increase Pell Grants from $4,731 to $5,350
$13 billion for low-income public schoolchildren
$12.2 billion for IDEA special education
$2.1 billion for Head Start
$2 billion for childcare services
$650 million for educational technology
$300 million for increased teacher salaries
$250 million for states to analyze student performance
$200 million to support working college students
$70 million for the education of homeless children
[edit] Aid to low income workers, unemployed and retirees (including job training)
Payments to Social Security recipients and people on Supplemental Security Income were parts of the final billTotal: $82.5 billion
$40 billion to provide extended unemployment benefits through Dec. 31, and increase them by $25 a week
$19.9 billion for the Food Stamp Program
$14.2 billion to give one-time $250 payments to Social Security recipients, people on Supplemental Security Income, and veterans receiving disability and pensions.
$3.95 billion for job training
$3 billion in temporary welfare payments
$500 million for vocational training for the disabled
$400 million for employment services
$120 million for subsidized community service jobs for older Americans
$150 million to help refill food banks
$100 million for meals programs for seniors, such as Meals on Wheels
$100 million for free school lunch programs
[edit] Infrastructure Investment
Total: $80.9 billion
[edit] Core investments (roads, bridges, railways, sewers, other transportation)
Road and highway construction is the biggest single line infrastructure item in the final billTotal: $51.2 billion
$27.5 billion for highway and bridge construction projects
$8 billion for intercity passenger rail projects and rail congestion grants, with priority for high-speed rail
$6.9 billion for new equipment for public transportation projects (Federal Transit Administration)
$6 billion for wastewater and drinking water infrastructure (Environmental Protection Agency)
$1.3 billion for Amtrak
$100 million to help public transit agencies
$750 million for the construction of new public rail transportation systems and other fixed guideway systems.
$750 million for the maintenance of existing public transportation systems
[edit] Investment into government facilities and vehicle fleets
Total: $29.5 billion
$4.6 billion for the Army Corps of Engineers for environmental restoration, flood protection, hydropower, and navigation infrastructure projects
$4.5 billion to the U.S. General Services Administration (GSA) for energy efficiency and renewable energy.
$4.2 billion to repair and modernize Defense Department facilities.
$4 billion toward the establishment of an Office of Federal High-Performance Green Buildings within the GSA.
$4 billion for the Clean Water State Revolving Fund (wastewater treatment infrastructure improvements)
$4 billion for public housing improvements and energy efficiency (Department of Housing and Urban Development (HUD)).
$2 billion for the Drinking Water State Revolving Fund (drinking water infrastructure improvements)
$890 million to improve housing for service members
$300 million to acquire electric vehicles for the federal vehicle fleet
$250 million to improve Job Corps training facilities
$240 million for new child development centers
$150 million for the construction of state extended-care facilities
$100 million to improve facilities of the National Guard
$240 million for the maintenance of United States Coast Guard facilities
[edit] Supplemental investments
Total: $15 billion[citation needed]
$7.2 billion for complete broadband and wireless Internet access
$1.5 billion for competitive grants to state and local governments for transportation investments
$1.38 billion for rural drinking water and waste disposal projects
$1 billion to the Bureau of Reclamation for drinking water projects for rural or drought-likely areas
$750 million to the National Park Service
$650 million to the Forest Service
$515 million for wildfire prevention projects
$500 million for Bureau of Indian Affairs infrastructure projects
$340 million to the Natural Resources Conservation Service for watershed infrastructure projects
$320 million to the Bureau of Land Management
$280 million for National Wildlife Refuges
$280 million for the National Fish Hatchery System
$220 million to the International Boundary and Water Commission to repair flood control systems along the Rio Grande
$220 million for other public lands management agencies
$500 million to update the computer center at the Social Security Administration
$290 million to upgrade IT platforms at the State Department
$50 million for IT improvements at the Farm Service Agency
[edit] Energy
Loans and investments into green energy technology are a significant part of the final billTotal: $61.3 billion[citation needed]
$11 billion funding for an electric smart grid
$6.3 billion for state and local governments to make investments in energy efficiency
$6 billion for renewable energy and electric transmission technologies loan guarantees
$6 billion for the cleanup of radioactive waste (mostly nuclear power plant sites)
$5 billion for weatherizing modest-income homes
$4.5 billion for the Office of Electricity and Energy Reliability to modernize the nation's electrical grid and smart grid.
$4.5 billion for state and local governments to increase energy efficiency in federal buildings
$3.4 billion for carbon capture experiments
$3.25 billion for the Western Area Power Administration for power transmission system upgrades.
$2.5 billion for energy efficiency research
$2 billion for manufacturing of advanced car battery (traction) systems and components.
$3.2 billion toward Energy Efficiency and Conservation Block Grants.[40]
$500 million for training of green-collar workers (by the Department of Labor)
$400 million for electric vehicle technologies
$300 million for federal vehicle fleets, to cover the cost of acquiring electric vehicles, including plug-in hybrid vehicles.
$300 million to buy energy efficient appliances
$300 million for reducing diesel fuel emissions
$300 million for state and local governments to purchase energy efficient vehicles
$250 million to increase energy efficiency in low-income housing
$600 million to cleanup hazardous waste that threaten health and the environment
$200 million to cleanup petroleum leaks from underground storage tanks
$100 million to evaluate and cleanup brownfield land
$400 million for the Geothermal Technologies Program
[edit] Housing
Total: $12.7 billion
$4 billion to the Department of Housing and Urban Development (HUD) for repairing and modernizing public housing, including increasing the energy efficiency of units.
$2.25 billion in tax credits for financing low-income housing construction
$2 billion for Section 8 housing rental assistance
$2 billion to help communities purchase and repair foreclosed housing
$1.5 billion for rental assistance and housing relocation
$510 million for the rehabilitation of Native American housing
$200 million for helping rural Americans buy homes
$130 million for rural community facilities
$100 million to help remove lead paint from public housing
[edit] Scientific research
NASA is among the government agencies receiving additional funds under the ActTotal: $8.9 billion
$3 billion to the National Science Foundation
$2 billion to the United States Department of Energy
$1.3 billion for university research facilities
$1 billion to NASA
$600 million to the National Oceanic and Atmospheric Administration (NOAA)
$580 million to the National Institute of Standards and Technology
$230 million for NOAA operations, research and facilities
$140 million to the United States Geological Survey
[edit] Other
Total: $18.1 billion[citation needed]
$8.8 billion: State Block Grants: in aid to states to defray budget cuts.
$4 billion for state and local law enforcement agencies
$1.1 billion for improving airport security
$1 billion in preparation for the 2010 census
$720 million for improving security at the border and ports of entry
$750 million for DTV conversion coupons and DTV transition education
$210 million to build and upgrade fire stations
$150 million for the security of transit systems
$250 million for the security of ports
$26 million to improve security systems at the Department of Agriculture headquarters
$150 million for an increase of claims processing military staff
$150 million for VA general operating expenses
$50 million for the National Endowment for the Arts to support artists
$50 million for the National Cemetery Administration
$198 million for veterans affected by the Rescission Act of 1946
[edit] Assessments by economists
Recovery.gov, the website created for this Act.Economists such as Martin Feldstein, Daron Acemoglu, National Economic Council director Larry Summers, and Nobel Memorial Prize in Economic Sciences winners Joseph Stiglitz[41] and Paul Krugman[42] favor large economic stimulus to counter the economic downturn. While in favor of a stimulus package, Feldstein expressed concern over the act as written, saying it needs revision to address consumer spending and unemployment more directly.[43] Other economists, including John Lott,[44] Robert Barro and Nobel Prize-winners Robert Lucas, Jr.,[45] Vernon L. Smith, Edward C. Prescott and James M. Buchanan were more critical of the government spending.
On January 28, 2009, a full-page advertisement with the names of approximately 200 economists who are against President Obama's plan appeared in The New York Times and The Wall Street Journal. The funding for this advertisement came from the Cato Institute.[46][47]
On February 8, 2009, a petition signed by about 200 economists in favor of the stimulus had been created. This petition, written by the Center for American Progress Action Fund, said that President Obama's plan "proposes important investments that can start to overcome the nation's damaging loss of jobs," and would "put the United States back onto a sustainable long-term-growth path."[48]
Sen. Barack Obama, D-Ill., was the most liberal senator in 2007, according to National Journal's 27th annual vote ratings. The insurgent presidential candidate shifted further to the left last year in the run-up to the primaries, after ranking as the 16th- and 10th-most-liberal during his first two years in the Senate.
Quick stat:
Did you know in his last 12 months as an "acting" senator, there were 400 items voted on in the US Senate. Of those 400 items, Obama DID NOT vote on 231 of them. If he doesn't do his job over 50% of the time, what can we expect of him as President???
Votes:
He voted NO on a bill that would require schools to install software on computers to block sexually explicit material and PROTECT our children.
He voted NO on a bill that would require prisoners to pay court costs after bringing frivolous lawsuits against the state.
He voted YES to reinstate the Illinois Estate Tax.
He voted NO on a bill that would have created an income tax credit for all K-12 Students families.
He voted YES on a bill that create "Public Funding" for Supreme court races. Instead of making each candidate pay for their own campaign, they FORCE the people to pay for it.
Now, Barrack Obama wants to give drivers licenses to Illegal aliens.
Basic concepts and legal regulation According to Anglo-American property law, a mortgage occurs when an owner (usually of a fee simple interest in realty) pledges his interest (right to the property) as security or collateral for a loan. Therefore, a mortgage is an encumbrance (limitation) on the right to the property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property.[3]
As with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time, typically 30 years. All types of real property can be, and usually are, secured with a mortgage and bear an interest rate that is supposed to reflect the lender's risk.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential and commercial property (see commercial mortgages). Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security interest of the lender in the property, which may entail restrictions on the use or disposal of the property. Restrictions may include requirements to purchase home insurance and mortgage insurance, or pay off outstanding debt before selling the property.
Borrower: the person borrowing who either has or is creating an ownership interest in the property.
Lender: any lender, but usually a bank or other financial institution. Lenders may also be investors who own an interest in the mortgage through a mortgage-backed security. In such a situation, the initial lender is known as the mortgage originator, which then packages and sells the loan to investors. The payments from the borrower are thereafter collected by a loan service.[4]
Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Interest: a financial charge for use of the lender's money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.
Mortgage loans are generally structured as long-term loans, the periodic payments for which are similar to an annuity and calculated according to the time value of money formulae. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty years, depending on local conditions. Over this period the principal component of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and within each country.
Lenders provide funds against property to earn interest income, and generally borrow these funds themselves (for example, by taking deposits or issuing bonds). The price at which the lenders borrow money therefore affects the cost of borrowing. Lenders may also, in many countries, sell the mortgage loan to other parties who are interested in receiving the stream of cash payments from the borrower, often in the form of a security (by means of a securitization).
Mortgage lending will also take into account the (perceived) riskiness of the mortgage loan, that is, the likelihood that the funds will be repaid (usually considered a function of the creditworthiness of the borrower); that if they are not repaid, the lender will be able to foreclose and recoup some or all of its original capital; and the financial, interest rate risk and time delays that may be involved in certain circumstances.
[edit] Mortgage loan types There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.
Interest: interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower.
Term: mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date, or even negative amortization.
Payment amount and frequency: the amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.
Prepayment: some types of mortgages may limit or restrict prepayment of all or a portion of the loan, or require payment of a penalty to the lender for prepayment.
The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable-rate mortgage (ARM) (also known as a floating rate or variable rate mortgage). In many countries (such as the United States), floating rate mortgages are the norm and will simply be referred to as mortgages. Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.
In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the life (or term) of the loan. Therefore the payment is fixed, although ancillary costs (such as property taxes and insurance) can and do change. For a fixed rate mortgage, payments for principal and interest should not change over the life of the loan,
In an adjustable rate mortgage, the interest rate is generally fixed for a period of time, after which it will periodically (for example, annually or monthly) adjust up or down to some market index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where fixed rate funding is difficult to obtain or prohibitively expensive. Since the risk is transferred to the borrower, the initial interest rate may be from 0.5% to 2% lower than the average 30-year fixed rate; the size of the price differential will be related to debt market conditions, including the yield curve.
The charge to the borrower depends upon the credit risk in addition to the interest rate risk. The mortgage origination and underwriting process involves checking credit scores, debt-to-income, down payments, and assets. Jumbo mortgages and sub prime lending are not supported by government guarantees and face higher interest rates. Other innovations described below can affect the rates as well.
[edit] Mortgage underwriting Main article: Mortgage underwriting
[edit] Loan to value and downpaymentsMain article: Loan-to-value ratio
Upon making a mortgage loan for the purchase of a property, lenders usually require that the borrower make a down payment; that is, contribute a portion of the cost of the property. This down payment may be expressed as a portion of the value of the property (see below for a definition of this term). The loan to value ratio (or LTV) is the size of the loan against the value of the property. Therefore, a mortgage loan in which the purchaser has made a down payment of 20% has a loan to value ratio of 80%. For loans made against properties that the borrower already owns, the loan to value ratio will be imputed against the estimated value of the property.
The loan to value ratio is considered an important indicator of the riskiness of a mortgage loan: the higher the LTV, the higher the risk that the value of the property (in case of foreclosure) will be insufficient to cover the remaining principal of the loan.
[edit] Value: appraised, estimated, and actual Since the value of the property is an important factor in understanding the risk of the loan, determining the value is a key factor in mortgage lending. The value may be determined in various ways, but the most common are:
1.Actual or transaction value: this is usually taken to be the purchase price of the property. If the property is not being purchased at the time of borrowing, this information may not be available.
2.Appraised or surveyed value: in most jurisdictions, some form of appraisal of the value by a licensed professional is common. There is often a requirement for the lender to obtain an official appraisal.
3.Estimated value: lenders or other parties may use their own internal estimates, particularly in jurisdictions where no official appraisal procedure exists, but also in some other circumstances.
[edit] Payment and debt ratiosIn most countries, a number of more or less standard measures of creditworthiness may be used. Common measures include payment to income (mortgage payments as a percentage of gross or net income); debt to income (all debt payments, including mortgage payments, as a percentage of income); and various net worth measures. In many countries, credit scores are used in lieu of or to supplement these measures. There will also be requirements for documentation of the creditworthiness, such as income tax returns, pay stubs, etc; the specifics will vary from location to location.
Some lenders may also require a potential borrower have one or more months of "reserve assets" available. In other words, the borrower may be required to show the availability of enough assets to pay for the housing costs (including mortgage, taxes, etc.) for a period of time in the event of the job loss or other loss of income.
Many countries have lower requirements for certain borrowers, or "no-doc" / "low-doc" lending standards that may be acceptable in certain circumstances.
[edit] Standard or conforming mortgages Many countries have a notion of standard or conforming mortgages that define a perceived acceptable level of risk, which may be formal or informal, and may be reinforced by laws, government intervention, or market practice. For example, a standard mortgage may be considered to be one with no more than 70-80% LTV and no more than one-third of gross income going to mortgage debt.
A standard or conforming mortgage is a key concept as it often defines whether or not the mortgage can be easily sold or securities, or, if non-standard, may affect the price at which it may be sold. In the United States, a conforming mortgage is one which meets the established rules and procedures of the two major government-sponsored entities in the housing finance market (including some legal requirements). In contrast, lenders who decide to make nonconforming loans are exercising a higher risk tolerance and do so knowing that they face more challenge in reselling the loan. Many countries have similar concepts or agencies that define what are "standard" mortgages. Regulated lenders (such as banks) may be subject to limits or higher risk weightings for non-standard mortgages. For example, banks and mortgage brokerages in Canada face restrictions on lending more than 80% of the property value; beyond this level, mortgage insurance is generally required.[5]
[edit] Foreign currency mortgage In some countries with currencies that tend to depreciate, foreign currency mortgages are common, enabling lenders to lend in a stable foreign currency, whilst the borrower takes on the currency risk that the currency will depreciate and they will therefore need to convert higher amounts of the domestic currency to repay the loan.
[edit] Repaying the mortgage In addition to the two standard means of setting the cost of a mortgage loan (fixed at a set interest rate for the term, or variable relative to market interest rates), there are variations in how that cost is paid, and how the loan itself is repaid. Repayment depends on locality, tax laws and prevailing culture. There are also various mortgage repayment structures to suit different types of borrower.
[edit] Capital and interest The most common way to repay a loan is to make regular payments of the capital (also called the principal) and interest over a set term. This is commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK. A mortgage is a form of annuity (from the perspective of the lender), and the calculation of the periodic payments is based on the time value of money formulas. Certain details may be specific to different locations: interest may be calculated on the basis of a 360-day year, for example; interest may be compounded daily, yearly, or semi-annually; prepayment penalties may apply; and other factors. There may be legal restrictions on certain matters, and consumer protection laws may specify or prohibit certain practices.
Depending on the size of the loan and the prevailing practice in the country the term may be short (10 years) or long (50 years plus). In the UK and U.S., 25 to 30 years is the usual maximum term (although shorter periods, such as 15-year mortgage loans, are common). Mortgage payments, which are typically made monthly, contain a capital (repayment of the principal) and an interest element. The amount of capital included in each payment varies throughout the term of the mortgage. In the early years the repayments are largely interest and a small part capital. Towards the end of the mortgage the payments are mostly capital and a smaller portion interest. In this way the payment amount determined at outset is calculated to ensure the loan is repaid at a specified date in the future. This gives borrowers assurance that by maintaining repayment the loan will be cleared at a specified date, if the interest rate does not change.
[edit] Interest only The main alternative to a capital and interest mortgage is an interest-only mortgage, where the capital is not repaid throughout the term. This type of mortgage is common in the UK, especially when associated with a regular investment plan. With this arrangement regular contributions are made to a separate investment plan designed to build up a lump sum to repay the mortgage at maturity. This type of arrangement is called an investment-backed mortgage or is often related to the type of plan used: endowment mortgage if an endowment policy is used, similarly a Personal Equity Plan (PEP) mortgage, Individual Savings Account (ISA) mortgage or pension mortgage. Historically, investment-backed mortgages offered various tax advantages over repayment mortgages, although this is no longer the case in the UK. Investment-backed mortgages are seen as higher risk as they are dependent on the investment making sufficient return to clear the debt.
Until recently it was not uncommon for interest only mortgages to be arranged without a repayment vehicle, with the borrower gambling that the property market will rise sufficiently for the loan to be repaid by trading down at retirement (or when rent on the property and inflation combine to surpass the interest rate).
[edit] No capital or interest For older borrowers (typically in retirement), it may be possible to arrange a mortgage where neither the capital nor interest is repaid. The interest is rolled up with the capital, increasing the debt each year.
These arrangements are variously called reverse mortgages, lifetime mortgages or equity release mortgages (referring to home equity), depending on the country. The loans are typically not repaid until the borrowers die, hence the age restriction. For further details, see equity release.
[edit] Interest and partial capital In the U.S. a partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding capital balance is due at some point short of that term. In the UK, a part repayment mortgage is quite common, especially where the original mortgage was investment-backed and on moving house further borrowing is arranged on a capital and interest (repayment) basis.
[edit] Variations Graduated payment mortgage loan have increasing costs over time and are geared to young borrowers who expect wage increases over time. Balloon payment mortgages have only partial amortization, meaning that amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding principal balance is due at some point short of that term, and at the end of the term a balloon payment is due. When interest rates are high relative to the rate on an existing seller's loan, the buyer can consider assuming the seller's mortgage.[6] A wraparound mortgage is a form of seller financing that can make it easier to for a seller to sell a property. A biweekly mortgage has payments made every two weeks instead of monthly.
Budget loans include taxes and insurance in the mortgage payment;[7] package loans add the costs of furnishings and other personal property to the mortgage. Buy down mortgages allow the seller or lender to pay something similar to mortgage points to reduce interest rate and encourage buyers.[8] Homeowners can also take out equity loans in which they receive cash for a mortgage debt on their house. Shared appreciation mortgages are a form of equity release. In the US, foreign nationals due to their unique situation face Foreign National mortgage conditions.
Flexible mortgages allow for more freedom by the borrower to skip payments or prepay. Offset mortgages allow deposits to be counted against the mortgage loan. in the UK there is also the endowment mortgage where the borrowers pay interest while the principal is paid with a life insurance policy.
Commercial mortgages typically have different interest rates, risks, and contracts than personal loans. Participation mortgages allow multiple investors to share in a loan. Builders may take out blanket loans which cover several properties at once. Bridge loans may be used as temporary financing pending a longer-term loan. Hard money loans provide financing in exchange for the mortgaging of real estate collateral.
[edit] Foreclosure and non-recourse lending Main article: foreclosure
In most jurisdictions, a lender may foreclose the mortgaged property if certain conditions - principally, non-payment of the mortgage loan - occur. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt.
In virtually all jurisdictions, specific procedures for foreclosure and sale of the mortgaged property apply, and may be tightly regulated by the relevant government. There are strict or judicial foreclosures and non-judicial foreclosures, also known as power of sale foreclosures. In some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries, the ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower.
[edit] Mortgage lending: United StatesMan articles: Mortgage industry of the United States and Mortgage underwriting in the United States
[edit] Mortgages in the UK Main article: Mortgage industry of the United Kingdom
[edit] Mortgage lending in Continental Europe Within the European Union, the Covered bonds market volume (covered bonds outstanding) amounted to about EUR 2 trillion at year-end 2007 with Germany, Denmark, Spain, and France each having outstanding's above 200,000 EUR million[9]. In German language, Pfandbriefe is the term applied. Pfandbrief-like securities have been introduced in more than 25 European countries – and in recent years also in the U.S. and other countries outside Europe – each with their own unique law and regulations. However, the diffusion of the concept differ: In 2000, the US institutions Fannie Mae and Freddie Mac together reached one per cent of the national population. Furthermore, 87 per cent of their purchased mortgages were granted to borrowers in metropolitan areas with higher income levels. In Europe, a wider market has been achieved: In Denmark, mortgage banks reached 35 per cent of the population in 2002, while the German Bausparkassen achieved widespread regional distribution and more than 30 per cent of the German population concluded a Bauspar contract (as of 2001)[10].
[edit] CostsA study issued by the UN Economic Commission for Europe compared German, US, and Danish mortgage systems. The German Bausparkassen have reported nominal interest rates of approximately 6 per cent per annum in the last 40 years (as of 2004). In addition, they charge administration and service fees (about 1.5 per cent of the loan amount). In the United States, the average interest rates for fixed-rate mortgages in the housing market started in the tens and twenties in the 1980s and have (as of 2004) reached about 6 per cent per annum. However, gross borrowing costs are substantially higher than the nominal interest rate and amounted for the last 30 years to 10.46 per cent. In Denmark, similar to the United States capital market, interest rates have fallen to 6 per cent per annum. A risk and administration fee amounts to 0.5 per cent of the outstanding debt. In addition, an acquisition fee is charged which amounts to one per cent of the principal[10].
[edit] Recent trends
Mortgage Rates Historical Trends 1986 to 2010On July 28, 2008, US Treasury Secretary Henry Paulson announced that, along with four large U.S. banks, the Treasury would attempt to kick start a market for these securities in the United States, primarily to provide an alternative form of mortgage-backed securities.[11] Similarly, in the UK "the Government is inviting views on options for a UK framework to deliver more affordable long-term fixed-rate mortgages, including the lessons to be learned from international markets and institutions".[12]
George Soros's October 10, 2008 Wall Street Journal editorial promoted the Danish mortgage market model.[13] A survey of European Pfandbrief-like products was issued in 2005 by the Bank for International Settlements;[14] the International Monetary Fund in 2007 issued a study of the covered bond markets in Germany and Spain,[15] while the European Central Bank in 2003 issued a study of housing markets, addressing also mortgage markets and providing a two page overview of current mortgage systems in the EU countries.[16]
[edit] HistoryWhile the idea originated in Prussia in 1769[17], a Danish act on mortgage credit associations of 1850 enabled the issuing of bonds (Danish: Realkreditobligationer) as a means to refinance mortgage loans [18]. With the German mortgage banks law of 1900, the whole German Empire was given a standardized legal foundation for the emission of Pfandbriefe. An account from the perspective of development economics is available.[19]
[edit] Mortgage insurance Mortgage insurance is an insurance policy designed to protect the mortgage (lender) from any default by the mortgagor (borrower). It is used commonly in loans with a loan-to-value ratio over 80%, and employed in the event of foreclosure and repossession.
This policy is typically paid for by the borrower as a component to final nominal (note) rate, or in one lump sum up front, or as a separate and itemized component of monthly mortgage payment. In the last case, mortgage insurance can be dropped when the lender informs the borrower, or its subsequent assigns, that the property has appreciated, the loan has been paid down, or any combination of both to relegate the loan-to-value under 80%.
In the event of repossession, banks, investors, etc. must resort to selling the property to recoup their original investment (the money lent), and are able to dispose of hard assets (such as real estate) more quickly by reductions in price. Therefore, the mortgage insurance acts as a hedge should the repossessing authority recover less than full and fair market value for any hard asset.
[edit] Islamic mortgages Main article: Islamic economic jurisprudence
The Sharma law of Islam prohibits the payment or receipt of interest, which means that Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy outright using cash: Islamic mortgages solve this problem by having the property change hands twice. In one variation, the bank will buy the house outright and then act as a landlord. The home buyer, in addition to paying rent, will pay a contribution towards the purchase of the property. When the last payment is made, the property changes hands.[citation needed]
Typically, this may lead to a higher final price for the buyers. This is because in some countries (such as the United Kingdom and India) there is a Stamp Duty which is a tax charged by the government on a change of ownership. Because ownership changes twice in an Islamic mortgage, a stamp tax may be charged twice. Many other jurisdictions have similar transaction taxes on change of ownership which may be levied. In the United Kingdom, the dual application of Stamp Duty in such transactions was removed in the Finance Act 2003 in order to facilitate Islamic mortgages.[20]
An alternative scheme involves the bank reselling the property according to an installment plan, at a price higher than the original price.
Both of these methods compensate the lender as if they were charging interest, but the loans are structured in a way that in name they are not, and the lender shares the financial risks involved in the transaction with the home buyer.[citation needed]
[edit] Other terminologies Like any other legal system, the mortgage business sometimes uses confusing jargon. Below are some terms explained in brief. If a term is not explained here it may be related to the legal mortgage rather than to the loan.
Advance This is the money you have borrowed plus all the additional fees.
Base rate In UK, this is the base interest rate set by the Bank of England. In the United States, this value is set by the Federal Reserve and is known as the Discount Rate.
Bridging loan This is a temporary loan that enables the borrower to purchase a new property before the borrower is able to sell another current property.
Disbursements These are all the fees of the solicitors and governments, such as stamp duty, land registry, search fees, etc.
Early redemption charge / Pre-payment penalty / Redemption penalty This is the amount of money due if the mortgage is paid in full before the time finished.
equity This is the market value of the property minus all loans outstanding on it.
First time buyer This is the term given to a person buying property who has not owned property within the last three years.
Loan origination fee A charge levied by a creditor for underwriting a loan. The fee often is expressed in points. A point is 1 percent of the loan amount.
Sealing fee This is a fee made when the lender releases the legal charge over the property.
Subject to contract This is an agreement between seller and buyer before the actual contract is made.
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