Two Ways: Obama Lends Homeowners a Hand
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Fresh off signing the $787 billion economic stimulus bill, President Barack Obama reiterated his administration's commitment to shoring up the housing sector. The president pledged up to $275 billion to help stem home foreclosures today.
According to Reuters, tha plan is 3-prong:
- A $75 billion fund would be established to subsidize struggling homeowners.
- Fannie Mae (FNM) and Freddie Mac (FRE) may inject another $100 billion for more home loans as well as spur borrowing.
- The government could inject another $100 billion into Fannie and Freddie as they expand their exposure in the housing market.
An estimated 4 million "at risk" borrowers could see their payments reduced through loan modifications paid in part by the Treasury. The goal of the reductions is to bring down payments to 31% of the borrower's income.
See Professor Fil Zucchi's Mortgage Bailout: Time to Vent.
From the Bull Pen: Consider a play in gold as mentioned by Professor Fil Zucchi. The GLD ETF is an option. But the yellow metal could see a pullback as it has risen almost $200 in 30 days, so remember to set your sell stops.
From the Bear Cave: Homebuilders may eventually break the lows, but for now, it definitely feels too late to be shorting. We can revisit the downside in the XHB ETF after such rally has occurred.
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