The Obama administration is pumping $ 3 billion into programs to help the unemployed with foreclosure prevention. The Hardest Hit Fund would going to be doubled with one more $ 2 billion was announced last week to be put into the fund. $ 1 billion was given to a program to help unemployed borrowers who have delinquencies on their mortgages called Housing and Urban Development. This could very well help banks instead of homeowners which concerns many 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. $ 50 billion total is in the program for housing aid under the Troubled Asset Relief Program, which is where it comes from. 17 states, including the District of Columbia, have terrible unemployment rates right now making it so $ 2 billion could possibly 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 in the Hardest Hit Fund
The housing market, which has led the way out of past recessions, is dragging the current economic recovery down. the New York Times, having interest rates so low doesn’t help anything considering nobody can afford to refinance or purchase a home. It is hard to sell homes for those who are unemployed homeowners. 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. 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 the good side of the deal
It is likely that Obama has just helped a bunch 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. Abromowitz suggested that lenders should be required to make concessions and possibly even match funding. Those with underwater mortgages wouldn’t be helped too much with additional funding, says Dean Baker of the Center for Economic and Policy Research to the Hill. Dean feels like that homeowners need to have equity in their homes at the end or they’ll lose them anyway making it something that won’t work.
Further reading on this topic
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
