A True Economic Stimulus Plan

There are 75 Million Owner Occupied Households in the US. (US Census)
$12 Trillion in outstanding home loans. (Forbes)
Average outstanding home loans per owner occupied household is $160K.

Of the home loans that are high risk subprime loans; If we lowered their rates to a fixed 5% from their typical ARM 10%, homeowners would see a monthly payment of about $850 rather than $1400.

That's a stimulus check of $550 each month or $6600/yr.

If a homeowner had good credit and already had a fixed 6% rate, they pay monthly $960. This new plan saves them $110/month or $1320/yr.

7% of outstanding home loans are high risk subprime loans or ARMs of 10% (5,250,000). (Forbes)
$6600 x 5,250,000 = $34,650,000,000
$1320 x 69,750,000 = $92,070,000,000
Total = $126,720,000,000

This is $25 Billion shy of what the federal government would pay out, but this would solve the economic problem of subprime loans and end foreclosures. Also, it help those that really need it, the homeowners. It would punish those that cheated the system: the subprime lenders or predatory lenders, but not enough to bankrupt them.

It would cost the government zero dollars, money they could put towards education which also stimulates the economy. Every $1 spent in education equals a $5 growth in the economy (US Dept of Education). No other economic investment can say this, not spending in social services, health care, military, or even infrastructure spending.

So if the government spent the $150 Billion towards education it would stimulate the economy by $750 Billion. Add this to the $127 Billion from making all mortgages a fixed 5% and we have a $876 Billion economic stimulus plan.

The 5% law would only benefit existing mortgages and those in the foreclosure process. All new mortgages from the day the law is enacted would be subject to market rates. This would teach lenders that proper risk management is crucial. It wouldn't be a bail out because no money would go from the government's hand to the lender or the homeowners. It would protect the true victims: the homeowners. It would also free up the courts and counties from foreclosure deliberations and sales.

Land, property, and home ownership are the indicators of wealth. They provide collateral and equity for the owner in order to establish credit and achieve greater wealth. The 5% law would prevent the recently acquired wealth of the poor and working class from shifting back to the upper class and rich through the purchase of foreclosed deeds.

This plan will work if Congress was brave enough to push it through.