The Obama administration is pumping $ 3 billion into programs to help the unemployed with foreclosure prevention. Last week it was announced the program should be doubled with another $ 2 billion being added to the Hardest Hit fund. A Housing and Urban Development program that is supposed to help unemployed borrowers who’s mortgages are delinquent got another $ 1 billion. However, some housing experts are concerned that the funding infusion will help banks more than homeowners.
Trying to stop foreclosure makes for a money pit
February was when the Hardest Hit Fund started to help unemployed foreclosures, helping states make their own foreclosure prevention programs. The Wall Street Journal reports that the fund is at the moment financing initiatives in 10 states. The money is part of $ 50 billion earmarked for housing aid under the Troubled Asset Relief Program. 17 states could be able to take advantage of the $ 2 billion, including the District of Columbia, that have unemployment rates super high. HUD will get $ 1 billion for giving bridge loans with no interest up to $ 50,000 to those eligible who have to make mortgage payments for two years.
Getting hardly anything in the Hardest Hit Fund
Recessions usually are helped quite a bit by the housing market, although this time the housing market is what began the whole recession. Hardly everyone can refinance or purchase although interest rates are at record lows, reports the New York Times. Unemployed homeowners who live in communities where values have fallen sharply are often unable to sell. Their foreclosures weaken neighborhoods and create a vicious cycle that further undermines the housing market. The Hardest Hit Fund will help 140,000 borrowers if it actually works right. 14.6 million unemployed are looking at foreclosing, meaning the 400,000 unemployed helped through the HUD and Hardest Hit programs is hardly anything.
Easy comes for mortgaged lenders
Banks, not unemployed homeowners, will benefit more from Obama’s unemployed foreclosure funding, some experts believe. David Abromowitz, senior fellow at the Center for American Progress, told The Hill that banks should be required to share the burden being faced by unemployed borrowers. Principal reductions on loans or other major modifications don’t have to be made by mortgage lenders which is a big problem. As outlined by Abromowitz, lenders should match funding and make concessions. Dean Baker of the Center for Economic and Policy Research told The Hill that with so many people with underwater mortgages, the new funding is unlikely to do much good. Dean thinks the programs won’t work because homeowners without equity in their homes are bound to lose it at the end of the whole process anyway.
More on this topic available at these websites
Wall Street Journal
online.wsj.com/article/SB10001424052748704901104575423493999575302.html
New York Times
nytimes.com/2010/08/12/business/12treasury.html
The Hill
thehill.com/blogs/on-the-money/banking-financial-institutions/114349-banks-to-benefit-most-from-white-house-program-to-stave-off-foreclosures
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