President Barack Obama unveiled a $75-billion housing foreclosure plan late last month to heal the ailing economy. He called on banks that accept federal aid to grant up to a 90-day moratorium on foreclosures for families making a genuine effort to pay their mortgages. This should hopefully give the people some encouragement and breathing room before they get back on their feet.
Top Banks like Citigroup Inc, JP Morgan Chase & Co, Bank of America Corp, Morgan Stanley and Wells Fargo & Co have announced that they would temporarily suspend foreclosures. The bill is one of the most far-reaching state proposals to address the crisis in subprime lending and foreclosures, and it reminds us of the long-term foreclosure moratoriums that provided relief to homeowners in 1930s during the Great Depression.
The various factors that continue to contribute to this condition are job loss and wage reductions caused by the economic crisis, to being granted subprime home loans which many of them could not afford. While the President feels that part of the reason for this crisis is also that everyone lived beyond their means-from Wall Street to Washington to the person on Main Street.
Obama foreclosure plan 2009
The implementation of this program will help reduce the number of ‘preventable foreclosures’ amidst a deepening recession. However this issue will be dealt on case by case and only the eligible will be granted moratorium after thorough scrutiny as it is for “responsible” homeowners, eliminating thousands who knowingly bought properties they could not afford.
In 2008, foreclosure filings were reported on 2.3m US properties, an increase of 81 per cent from 2007 and up 225 per cent from 2006, according to the RealtyTrac US Foreclosure Market Report, a leading national online foreclosure marketplace and source of foreclosure information. For example, Las Vegas has the highest foreclosure rate in the U.S, with one of every 60 housing units receiving a foreclosure filing in February. New York ranks No.35 among the states in terms of foreclosure activity. In Tennessee, an average of 125 families a day goes into foreclosure or loses their home at an auction.
Homeowner Affordability and Stability Plan
Since the housing bubble burst last year, many homeowners are now saddled with mortgages that have a much higher principle than the market value of their homes. Obama administration’s new anti-foreclosure plan (Homeowner Affordability and Stability Plan) and the housing bill passed by the House of Representatives last week (Helping Families Save Their Homes Act of 2009) would go a long way towards allowing many families to remain in their own homes.
Not only this it also provides incentive payments to lenders and is trying to encourage them to modify by Dec.31, 2012, existing mortgages for nearly four million Americans who will face foreclosure if nothing is done, as well as rewards to borrowers who pay on time for five years after modification. There are other proposed plans by the Treasury and the Federal Reserve in the offing that are intended to provide relief to struggling homeowners, including subsidies for mortgage payments.
