Those unemployed have a little less to worry about considering the Obama administration is trying to prevent foreclosures with an extra $ 3 billion. 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 intended to help unemployed borrowers who’s mortgages are delinquent got one more $ 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
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. $ 50 billion total is within the program for housing aid under the Troubled Asset Relief Program, which is where it comes from. The $ 2 billion infusion could be distributed to housing agencies in 17 states, plus the District of Columbia, that have the highest unemployment rates. One who is 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.
Hardest Hit Fund receiving little money comparatively
Recessions typically are helped quite a bit by the housing market, although this time the housing market is what started the whole recession. Hardly any person 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 really works right. With the new money, both the Hardest Hit and HUD programs could eventually help about 400,000 borrowers — a drop in the bucket set against 14.6 million unemployed and three million unemployed borrowers contemplating foreclosure.
Mortgage lenders getting it easy
Numerous think that banks will get more from the unemployed foreclosure funding than unemployed homeowners will. 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. Abromowitz suggested that lenders should be required to make concessions and possibly even match funding. The Hill also interviewed Dean Baker from the Center for Economic and Policy Research who said that funding wouldn’t even help people with underwater mortgages. 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.
Additional reading 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
