Veterans from Afghanistan and Iraq could in a way serve the country once again -- this time stateside on the economy -- if one federal official can push his idea forward.
Richard Peach, senior vice president at the Federal Reserve Bank of New York, said thinks there should be incentives for the veterans to buy government-held foreclosures. At a recent conference of the National Association of Realtors, he suggested giving down payment help or some type of tax break to veterans for buying foreclosures owned by mortgage finance giants Fannie Mae and Freddie Mac.
"We had a tax credit for first-time home buyers, then we had a tax credit for anyone who could qualify to buy a house," Peach said. "Why not have a perhaps even more generous credit for people who have served us and simultaneously do something that's good for the economy overall?"
He said he can imagine an incentive structured like the home buyers tax credit, perhaps $16,000 that can be applied to the down payment of a veteran who qualifies for a mortgage.
This will help absorb the huge inventory of foreclosures that many experts predict will be unloaded onto the market in the coming years, he said. A flood of for-sale homes would further depress property values and the economy.
As of this week, Fannie Mae had 66 foreclosures for sale on Long Island, and Freddie Mac had 12. Fannie had more than 122,600 foreclosures nationwide at the end of the third quarter. Freddie Mac had 59,000 foreclosures at the end of the third quarter.
Peach said he did not yet have a "cleanly designed" proposal and that his thoughts were "more on the raw ideas stage."
But he’s a guy who's been driven and confounded, like many, by a current-day mystery: Why does the housing sector still act as if it didn't get any medicine: low interest rates, a buyers tax credit, loan modification incentives, higher limits on loan insurance and more.
Peach said he plans to write soon for the federal reserve’s Liberty Street Economics blog on what's holding back the housing market, including possible details on the veterans incentive idea.
The executive said: "I think this is something that we can do that would make people feel good."