After months of criticism that it hasn’t done enough to prevent foreclosures, the Obama administration is announcing a plan to reduce the amount some troubled borrowers owe on their home loans.
The multifaceted effort will let people who owe more on their mortgages than their properties are worth get new loans backed by the Federal Housing Administration, a government agency that insures home loans against default.
That would be funded by $14 billion from the administration’s existing $75 billion foreclosure-prevention program. But it could spark criticism that the government is shouldering too much risk by taking on bad loans made during the housing boom. In addition, their existing mortgage companies will be able to receive incentives to lower their principal balances.
The program also includes assistance to help unemployed homeowners keep paying their mortgages. But the administration cautioned that the plan isn’t intended to stop all foreclosures or assist all troubled homeowners.
A Treasury Department document said, “investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes.”
“Some people simply will not be able to afford to stay in their homes because they bought more than they could afford,” the document said.
Mark Zandi, chief economist at Moody’s Analytics, estimated the plan could help between 1 million and 1.5 million homeowners avoid foreclosure. That compares to 4.5 million that are already in foreclosure proceedings or 90 days delinquent on their mortgages, he said. There are another 10 million homeowners who owe more than their homes are worth, Zandi estimates.
“The changes are wide-ranging and significant and have the real potential for bringing the foreclosure crisis to a much quicker end,” Zandi said.
For more information contact Robert Prophet and the Robert Prophet Group. Send us an email or visit our web site: RobertProphet.com
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what with the cig??