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Real Estate

Is it true that the government is considering a plan that would reimburse new home buyers if the value of their property declines later?

Some real estate experts are shopping the idea around on Capitol Hill, but no formal bill to create such a program has yet to be introduced. One of the biggest supporters of such a plan is Joe Hanauer, who rose to fame while heading one of the largest real estate outfits in Chicago and now serves as chairman of Move Inc., which operates Internet realty giant Move.com. He has already met with several Congressional representatives and officials at the U.S. Department of Housing and Urban Development to "sell" them on the proposal, which he believes could help jump-start the housing market by easing the concerns among many of today's prospective buyers that prices could fall even further — a fear that has kept many of them on the home-buying sidelines. Such a national “home-value insurance” plan could take one of several forms, based largely on the amount that buyers and/or sellers would have to chip in for the coverage and how much the federal government would pay to help cover any possible losses in the property's later resale price. Hanauer envisions a plan that would require an insurance premium equal to 1 percent, 2 percent or 3 percent of the home's purchase price. If the home were sold for a loss after three years or more, the government-backed insurance would cover a loss of up to 10 percent of the price that the buyer originally paid. Hanauer says the cost could range from $20 billion to $150 billion, depending on how much consumers would pay and how much the government would reimburse them if they sell at a loss. Hanauer admits that our federal government is already running at a record deficit, and that the housing and banking industries (as well as new home buyers) have already received billions of dollars in various types of financial aid. But one particular item in his plan is, I think, particularly brilliant: If the program were approved today and a buyer purchased a home tomorrow with the coverage, the government would get a small share of the profit if the house sold for more than the buyer originally paid — thus reimbursing Uncle Sam for some of the cost of operating the program and maybe (one day) actually turning it into a small profit center for the Treasury. Just imagine ... a government program that could actually make money instead of wasting it!

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