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 intended to help unemployed borrowers who’s mortgages are delinquent got one more $ 1 billion. This could very well help banks instead of homeowners which concerns numerous experts.
Seems like a money put with preventing foreclosures
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. 10 states are taking advantage of this initiative right now, reports the Wall Street Journal. The Troubled Asset Relief Program has $ 50 billion total to hand out witch then gets put into housing aid. 17 states, such as the District of Columbia, have terrible unemployment rates right now making it so $ 2 billion could be split among them. Another $ 1 billion goes to HUD for providing interest-free bridge loans of up to $ 50,000 for eligible unemployed borrowers to be used to make mortgage payments for up to two years.
Hardly any money within the Hardest Hit Fund
Recessions usually are helped quite a bit by the housing market, although this time the housing market is what started the whole recession. Hardly anybody can refinance or buy although interest rates are at record lows, reports the New York Times. Everyone who is an unemployed homeowner has a very difficult time selling their home. 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 really works right. With the new money, both the Hardest Hit and HUD programs could eventually help about 400,000 borrowers — a drop within the bucket set against 14.6 million unemployed and 3 million unemployed borrowers contemplating foreclosure.
Mortgage lenders getting it easy
It is likely that Obama has just helped a bunch of banks out more than unemployed homeowners with these new programs. The Hill reported that senior fellow at the Center for American Progress, David Abromowitz said that unemployed borrowers shouldn’t be the only ones getting hit; banks should be hit too. He said the main problem with the funding is that mortgage lenders don’t have to make principle reductions on loans or any major modifications. Concessions should be make by lenders along with matching the funding, says Abromowitz. Those with underwater mortgages wouldn’t be helped too much with extra funding, says Dean Baker of the Center for Economic and Policy Research to the Hill. Dean thinks that 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.
Discover more details on this subject
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
