One-Year Mortgage Holiday Plan

A One-Year Mortgage Holiday.  Congress should declare a national mortgage holiday for one year.  During such year there would be a moratorium on the monthly or other periodic mortgage payments on all residential, commercial, industrial and farm loans.  All foreclosures would stop.  Borrowers who do not need relief could elect to opt out.  This one-year “Time Out” from mortgage payments will instantly empower millions of American families and businesses to divert their monthly mortgage payment money directly into their own personal & business pockets to save, invest, spend or reduce other personal and business debt, as well as paying down or off credit card debt. The Government would pay to the lender an estimated, average interest-only monthly payment (not to exceed 6%).  Then, after the one-year “Time Out,” the regular monthly mortgage payments would resume as normal with the original mortgage term simply being one year longer. So a 25-year mortgage simply becomes a 26-year mortgage. No balloon payments would be due until a year after the end of the moratorium.  If a borrower owning rental property participated in the moratorium for the mortgage on rental property, the tenants would get one year of 25% to 50% reduction in monthly renters’ relief, to be negotiated between individual owners and renters, on a specially designed renters’ relief program, so that up to 50% of the relief the property owner receives would be passed through to the tenants of the property.  Retail and office tenants could also participate in  25% to 50% monthly rent relief, to be negotiated between individual landlords and tenants, if their landlords choose to opt in to the One-Year Mortgage Holiday Plan.

Assuming there is an estimated current $12 trillion of total mortgage real estate debt in the nation, with approximately 80% representing residential debt and the remaining 20% made up of farms and commercial debt, applying a 6% annual interest rate would equal approximately $720 billion ($12 trillion x 6% = $720 billion / 12 = $60 billion monthly) of Government taxpayer expense to reimburse all mortgage lenders the interest portion of mortgage debt for one year.   However, it is likely many borrowers who do not need relief would elect not to participate.

If American families’ and businesses’ regular monthly mortgage payments (rough guesstimate of $100 billion monthly) are infused directly back into the economy, there would be a huge economic stimulus for the country. WOW, now that’s real, positive job-creating stimulus, to jump start America’s economy quickly!

A new Government commercial mortgage-backed security (GCMBS) loan program should also be made available.  This GCMBS loan program would unfreeze the current commercial credit markets to make affordable refinancing easily available for all the existing retail, office, restaurant, industrial, hotel, farm, apartment and miscellaneous commercial real estate loans coming due or that wish to refinance early.  The Federal Government would guarantee the GCMBS loans; a portion of the interest paid on such loans would be paid to the Federal Government to offset part of the cost of the guaranty.  Such a program is badly needed to make long-term financing available and to bring stability to the commercial financial markets.  Its existence and the investment that would follow would help create many new jobs and help preserve millions of existing jobs.

Suggested refinancing (GCMBS) loan terms could be:

* 30-25-20-15 year terms, fully amortizing loans.
* Initial interest rate of 3% for years 1 & 2, 4% for years 3 & 4, 5% for years 5 & 6, and 6% fixed thereafter for the remaining term of the loan with no prepayment penalty.
* Basic underwriting loan criteria could be up to 80% Loan to Value – LTV – and a 1.20 Debt Service Coverage Ratio – DSCR.