The Government Cosigning for the American Dream
Since the end of WWII millions of Americans have achieved the American Dream with the US Government co-signing for their house loans until 2005. The banks never did buy a score below 650, but with the government co-signing for the loan the banks bought the deal. These buyers often lived in their home 20-30 years. They purchased it for $75,000 and sold it for $150,000. With their equity, a small savings and Social Security they could retire. Not so today!
The banks still do not purchase deals below 650 credit score, the government quit co-signing and so millions are forced to rent. Some rentals are taxpayer subsidized. There are millions of apartments being built. The people are paying $800-$3,000 a month in rent. There is almost no way they can save up a 20% down payment. Many are thus doomed to renting and can never achieve the American Dream.
With the govenment out of the picture, it has opened the doors for entities to charge exorbitant interest rates of up to 18% to purchase a home. This is not unlike prohibition. When the goverment quits, the void is filled by people from the dark side.
95% of these people are paying rent each month instead of a house payment. Most have always made their payments. Fannie and Freddie are still throwing off millions in profits. It works!!
The land and all the improvement cost is equal to 50%-60% of the cost of the home. In our manufactured home community, we lease the land, permits and improvements for about $300 mo. That’s is a phenomenon!!
There is nothing these people can look forward to because the gov’t has failed to help them and because of that they are condemning millions of Americans to stay down on the plantation and never achieve their American Dream.
I am in the Manufactured Home Industry. I call my industry a phenomenon. Here’s why – “It’s too good to be true.” That’s a phenomenon.
Never before in the history of the world has a country been able to give their people a home for 1 to 2 years annual income. That’s a phenomenon.
If we had FHA, Fannie and Freddie co-signing for loans in a land-lease, it would look like this; Banks could get 150-200 basis points over a real estate loan. This would currently equate to about a 6% chattel loan. This is a premium for banks of 50%. These consumers could purchase a $70,000, 1500 square foot manufactured home with 3 bedrooms 2 bathrooms with 3-5% down, 15 year loan at approx. $550 per month (depending on the market, that should cover PITI). They could put their home in a manufactured home community for approx. $300 monthly site lease, for a total home payment of $850 per month. Their debt would not exceed roughly $67,000. They would benefit with interest tax credit to lower their cost even more and pay off their home in 15 years.
The country has been hitting on 4 of 8 cylinders. The reason is the 800 lb. gorilla is not in the game. We all know the impact the housing market has on the economy. Getting all the industries supporting the housing industry could easily get to 6, 7 or 8 cylinders fired up. There is no other way. The stock market is not going to go a lot higher, the auto industry is maxed out, so there is no other way to move the economy in a meaningful way. ##
Ronald A. Thomas
Rona Homes founder
Editor’s Note: A video interview with Ron Thomas Sr. is linked here. Other perspectives on the finance or other MH related issues are encouraged.