Have You Heard About the Mortgage Holiday Proposal?

Imagine the impact a year long mortgage holiday could have on the American economy. 12 long months without the need to make even one mortgage payment; the money consumers could keep in their pockets could be used for much needed purchases and also bill payments to help consumers get back on their feet. Who would pay for such a mortgage holiday? The federal government, of course – or, to be more correct and get right back to the source, you and I.

Sure, at this point the mortgage holiday proposal is still a bit of a pipe dream and there is actually nothing in the works, but the idea has found favor with consumers and informal polls suggest that should a proposal be made, the general public would back it. The program itself is not as new as it may sound to American ears. Across the ocean in Europe it is already a staple in the fiscal landscape of some countries.

Most notably Spain offers unemployed homeowners the opportunity to defer nearly half of the mortgage payments they owe for up to two years. Spanish mortgage lenders are mandatory participants of the plan and the government backs the expenditures that must be laid out for the mortgage holiday program to succeed. Great Britain is now also taking a closer look at this suggestion and something that is known as the “Homeowner Mortgage Support Scheme” is now loosely bandied about.

As it stands, British mortgage lenders may – at their discretion – temporarily defer interest payments. Unfortunately, these payments are later on tacked on to the end of the loan and thus increase the amount of money that must be paid to satisfy the note. If the American Congress would imitate this kind of deal and go even further to make it a one year mortgage holiday, it could potentially cost taxpayers a staggering $600 billion. On the other hand, seeing how much money the Obama Administration is funneling to the banks in an effort to keep them afloat, it is a mere drop in the bucket.

What is more, unlike other stimulus plans currently in the works an in execution, a mortgage holiday would actually put the money into the consumers’ and not the banks’ pockets, making it a true stimulus incentive for spending, and a great means of inspiring banks and businesses to offer spending incentives. In a day and age where virtually anyone is holding a hand out for a bailout payment, it is only a matter of time until the flaws of governmental bailouts of big institutions will render them meaningless.

Unfortunately, it is doubtful that the bank sponsored lobbying groups will allow such a program to come into consideration any time soon. Instead, there is a good chance that more bailouts of the banks will be lobbied for, while the needs of the individual homeowners may be cited as motivation for the bailouts, but in the end will not be addressed when the money is actually transferred to the banks.

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