$ 3 billion could be given by the Obama administration to help anyone getting foreclosed who’s unemployed. Last week the administration announced plans to allocate $ 2 billion toward the Hardest Hit Fund, doubling the size of the program. $ 1 billion was given to a program to help unemployed borrowers who have delinquencies on their mortgages called Housing and Urban Development. However, some housing experts are concerned that the funding infusion will help banks more than homeowners.
The foreclosure prevention 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. As outlined by the Wall Street Journal, the program works with 10 states at present. The money is part of $ 50 billion earmarked for housing aid under the Troubled Asset Relief Program. The $ 2 billion infusion will be distributed to housing agencies in 17 states, plus the District of Columbia, that have the highest unemployment rates. 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.
Getting hardly anything within 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 reports that interest rates are at record lows, but too few can afford to purchase or refinance. Anyone who is an unemployed homeowner has a very difficult time selling their home. Values of homes in neighborhoods go down drastically with foreclosed homes, which doesn’t at all help. The Hardest Hit Fund will help 140,000 borrowers if it actually works right. 14.6 million unemployed are looking at foreclosing, meaning the 400,000 unemployed helped through the HUD and Hardest Hit programs is hardly anything.
Deal seems great for mortgage lenders
Banks, not unemployed homeowners, will benefit more from Obama’s unemployed foreclosure funding, some experts believe. 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 really feels that mortgage lenders should be making principal reductions on loans and other modifications, although they don’t have to do that. 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 feels like that homeowners have to have equity in their homes at the end or they’ll lose them anyway making it something that won’t work.
More on this topic available 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
