Economic Idea 3: Government insurance for mortgage downpayments - Get a mortgage without the need for a downpayment of 20% - Boost GDP by 30% - Create 100 million jobs in 5 years time - Create $1 trillion per year of new government revenues
This genius idea results in that Americans don't need a downpayment for their mortgage(s) anymore. They only need to be credit-worthy to get the mortgage loan, like with their credit score or have sufficient income. Americans can buy a house or apartment without the need for a down payment on their mortgage.
How does it work?
The government collects 2% of the value of the house, so you pay 2% more on the value of the house, like a $200,000 house you pay $4,000 more or $204,000, so if your monthly mortgage payments are $1,000 per month, you pay $1,020 per month. So you ask for the downpayment insurance program with each mortgage, this 2% collected on each mortgage, goes into a government insurance fund. As soon as the mortgage lender stops paying their mortgage and thus defaults, 20% is paid out by the government insurance fund to the bank for the purchase value of the house. Only 1 in 10 mortgages default, or even much less, so by collecting 2% on each mortgage, the banks are insured for the defaults on each mortgage, so they don't need to ask for a downpayment for the mortgage anymore.
The real estate industry is responsible for at least 20% of US GDP, or at least 50 million jobs are related to the real estate economy. If Americans don't need to save for their mortgage downpayments anymore, they don't have to wait for saving money for a house and they can buy a house immediately. On a $200,000 house, they save $40,000. This means the number of new mortgages signed by banks will double or triple each year. So if 50 million jobs are involved with the real estate industry, it will certainly double to 100 million jobs, so we create 50 million more jobs. This also results in $500 billion per year of more government revenues due to a boost of GDP by 20% immediately and the immediate creation of 50 million more jobs.
Americans don't need to ask their parents anymore to give or gift them money for a downpayment of a house of $40,000. All their children, if they have a job and good credit rating, can buy a house on mortgage without using savings. Also Americans who have less than good credit, can get a mortgage now.
It doesn't matter if it's your first house mortgage, second house mortgage or third house mortgage, the government insurance for downpayments can always be issued.
For European governments, those that collect VAT on new houses, they can make an additional 21% (or respective) VAT income on each house, resulting in billions of dollars of more government income. Also, in the United States, state governments will earn more property tax revenues on each new house, resulting that state budgets are all in surplus.
Also house related jobs, not only construction jobs, will boost like electricians, plumbers, etc
Also the car industry will get a boost, people who buy a new house usually also buy a new car and with the savings the Americans make, the consumer spending is up another 10%, they can stop saving for a downpayment for a house and spend their income in the economy, resulting in another 10% GDP growth per year due to increased consumer spending, for a total GDP growth of 20% + 10% = 30% per year!
And at least 50 million jobs are created the first year, and another 10 million jobs per year over the next 5 years due to the 10% GDP growth per year over 5 years time. So we have about 100 million new jobs and $1 trillion per year of new government revenues in 5 years time.
This government insurance for down payments can be designed so we don't have another credit crisis, like it only applies to Americans who have at least a good credit score and a variable insurance rate of 2-4%, so even if 1 in 5 defaults, this government insurance fund program can not run into deficit. We don't allow subprime mortgage loans!
This is a massive economic idea to boost the US economy and to solve our government budget deficit!