Sympathy keeps pouring out of the Obama administration for troubled homeowners that owe more than the current value of their homes. Not a government to tolerate the unfairness of financial distress, it has announced another housing program for under-water homeowners.
Taking a $14 billion chunk of the existing $75 billion foreclosure-prevention program, the new program asks that banks and lenders reduce the amount that homeowners owe on their loans and offer them new loans. The new loans will be backed by the Federal Housing Administration.
In exchange for slashing the debt owed by the borrowers and participating in the administration’s existing foreclosure prevention program, the lenders will receipt incentive payments from the government.
The plan also includes three to six months of temporary aid for borrowers who have lost their jobs. There will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans – a problem that has blocked many loan modifications.
Will this, the latest and greatest government housing rescue program really work? Well, so far all the prior Obama administration housing rescue plans have been dismal failures. Personally, I don’t see this current plan making a significant difference.
Many people purchased homes way out of line with their realistic budgets. Plus, a large percentage of recent homeowners who had their home loans modified are once again behind in payments.
Question: In your opinion, will this prolong the housing recovery?