$ 3 billion can be given by the Obama administration to help any person getting foreclosed who is unemployed. Last week it was announced that the program should be doubled with one more $ 2 billion being added to the Hardest Hit fund. $ 1 billion was given to a program to help unemployed borrowers who have delinquencies on their mortgages called Housing and Urban Development. Experts are really just worried that banks instead of homeowners will benefit more from this.
Money pit with foreclosure prevention
The Hardest Hit Fund was began to help states make their own foreclosure prevention programs in February, helping those with unemployed foreclosures. The Wall Street Journal reports the fund is presently financing initiatives in 10 states. $ 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 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.
Getting hardly anything within the Hardest Hit Fund
Recessions typically are helped quite a bit by the housing market, although this time the housing market is what began the whole recession. The New York Times reports that interest rates are at record lows, but too few can afford to purchase or refinance. Everyone who is an unemployed homeowner has a very difficult time selling their home. The housing market gets worse with foreclosures make neighborhood values go down. Until now, the Hardest Hit Fund had been projected to help about 140,000 borrowers. About 400,000 families might be helped through the Hardest Hit and HUD programs, which is not much considering 14.6 million individuals are having foreclosure troubles because of unemployment.
Mortgage lenders getting the good side of the deal
Numerous think that banks will get more from the unemployed foreclosure funding than unemployed homeowners will. 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 primary problem with the funding is that mortgage lenders don’t have to make principle reductions on loans or any major modifications. According to 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 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.
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
