The Obama administration is pumping $ 3 billion into programs to help the unemployed with foreclosure prevention. 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. Experts are really just worried that banks instead of homeowners will benefit more from this.
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 within the program for housing aid under the Troubled Asset Relief Program, which is where it comes from. The $ 2 billion infusion can be distributed to housing agencies in 17 states, plus the District of Columbia, that have the highest unemployment rates. 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.
Getting hardly anything within the Hardest Hit Fund
Recessions generally are helped quite a bit by the housing market, although this time the housing market is what started the whole recession. Hardly everyone can refinance or buy although interest rates are at record lows, reports the New York Times. Any person 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. 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 people are having foreclosure problems because of unemployment.
Mortgage lenders getting the good side of the deal
Banks, not unemployed homeowners, will benefit more from Obama’s unemployed foreclosure funding, some experts believe. Banks should be hurting along with unemployed borrowers says David Abromowitz who is 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. According to Abromowitz, lenders should match funding and make concessions. 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.
More on this topic accessible at these sites
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
