Rep. Gary Ackerman (D-N.Y.) plans to introduce a bill after the August recess that would give homebuyers up to $20,000 for down payment assistance on a previously foreclosed property.
Ackerman calls it the Homestead Act 2, modeled after the original law signed by President Abraham Lincoln in 1862. That bill awarded Union Army veterans the ability to file an application and claim up to 160 acres of government land. For the next five years, the homesteader was required to improve the land building a home and growing crops.
Ackerman said his bill would provide the first 2 million eligible borrowers an opportunity to claim the subsidy and help cut into the overhang of foreclosed property. The subsidy would come in the form of a loan to the owner-occupant, and one-fifth of it would be forgiven each year in the first five years of the homestead.
The bill would also provide a 10-year tax exemption for investors who buy the home and decide to rent it out.
To pay for the program, Ackerman said the bill would provide an incentive to companies for bringing up to $500 billion of offshore capital back to the U.S. The bill would reduce the corporate tax on repatriated earnings to 10%. The revenue from these new taxes would help pay for the program.
Ackerman said the bill would help clear the shadow inventory of 3 million foreclosed properties, which brought down home prices and continues to weigh on bank balance sheets. The exact number varies. CoreLogic (CLGX: 9.04+0.11%) recently put it at 1.7 million. The Mortgage Bankers Association said 4.5 million.
The bill would probably have trouble moving through the Republican-controlled House Financial Services Committee during a time when any perception of more government spending could be stomped out.
Still, Ackerman stressed the need for some action from Washington to boost a still struggling housing market and the overall economy.
"This would clear the way for new housing starts, and put millions of Americans back to work. It would incentivize corporations to bring their cash cheaply back into the United States. In addition, the newly emancipated billions would further spur the economy," he said. "Everybody wins."
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