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US to help homeowners

Economic growth, Financial Events, Leverage
By Paul Hodges on 27-Oct-2008

There are welcome reports this morning that the US government is finally putting in place measure to help homeowners in danger of foreclosure. The FDIC (Federal Deposit Insurance Corp) has developed guidelines that will “lower a loan’s interest rate, extend the life of the loan or defer payment on a portion of the principal”. The aim is to reduce monthly mortgage payments to a max 38% of the borrower’s pre-tax income.

The blog welcomes this move, as it should help to keep people in homes, and avoid more neighbourhoods being devastated by foreclosures. Unfortunately, though it is a “fix” and not a solution to the housing crisis. It is unlikely to kick-start demand for new homes once more, and the revised borrowing terms will put more pressure on lenders. So it will do little to stimulate chemical/polymer demand in this important sector.