Those unemployed have just a little less to worry about considering the Obama administration is trying to prevent foreclosures with an additional $ 3 billion. Last week the administration announced plans to allocate $ 2 billion toward the Hardest Hit Fund, doubling the size of the program. A Housing and Urban Development program that is designed to help unemployed borrowers who’s mortgages are delinquent got another $ 1 billion. Experts are really just worried that banks instead of homeowners will benefit more from this.
Trying to stop foreclosure makes for a money pit
To fend off an epidemic of unemployed foreclosures, the Hardest Hit Fund was launched in February as a way to help states design their own foreclosure prevention programs. According to the Wall Street Journal, the program works with 10 states at present. $ 50 billion total is in the program for housing aid under the Troubled Asset Relief Program, which is where it comes from. 17 states could be able to take advantage of the $ 2 billion, such as the District of Columbia, that have unemployment rates super high. One who’s eligible may receive up to $ 50,000 for mortgage payments for two years as a loan with no interest from the HUD, which is why they get $ 1 billion.
Hardly any money in the Hardest Hit Fund
The economic recovery is going down because of the housing market, which historically has helped all the recessions. According to the New York Times, having interest rates so low doesn’t help anything considering nobody can afford to refinance or buy a home. It is hard to sell homes for individuals who are unemployed homeowners. Their foreclosures weaken neighborhoods and create a vicious cycle that further undermines the housing market. Until now, the Hardest Hit Fund had been projected to help about 140,000 borrowers. About 400,000 families could be helped through the Hardest Hit and HUD programs, which isn’t really much considering 14.6 million people are having foreclosure troubles because of unemployment.
Deal seems great for mortgage lenders
It is likely that Obama has just helped a variety of banks out more than unemployed homeowners with these new programs. Banks should be hurting along with unemployed borrowers says David Abromowitz who’s the senior fellow at the Center for American Progress and had an interview with The Hill. 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 individuals with underwater mortgages, the new funding is unlikely to do much good. Dean said for the programs to work there has to be a reasonable expectation that homeowners could have some equity in their property at the end or they will lose their homes anyway.
More on this topic accessible at these sites
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
