Those unemployed have a little less to worry about considering the Obama administration is trying to prevent foreclosures with an extra $ 3 billion. Last week it was announced that the program should be doubled with an additional $ 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. However, some housing experts are concerned that the funding infusion will help banks more than homeowners.
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. The Wall Street Journal reports the fund is currently financing initiatives in 10 states. 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. HUD will get $ 1 billion for giving bridge loans with no interest up to $ 50,000 to those eligible who have to make mortgage payments for two years.
Hardest Hit Fund is nothing
Recessions generally are helped quite a bit by the housing market, although this time the housing market is what started the whole recession. Hardly anyone can refinance or purchase although interest rates are at record lows, reports the New York Times. 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. About 140,000 individuals could be helped with the Hardest Hit Fund. With the new money, both the Hardest Hit and HUD programs could eventually help about 400,000 borrowers — a drop in the bucket set against 14.6 million unemployed and three 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. 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. Concessions should be make by lenders along with matching the funding, says Abromowitz. 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 said for the programs to work there has to be a reasonable expectation that homeowners will have some equity in their property at the end or they will lose their homes anyway.
Additional reading 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
