Controversy Over Obama’s Foreclosure Prevention Plan

The $75 billion foreclosure prevention plan introduced by President Barack Obama has been opposed by financial analysts and some homeowners who claim that the program rewards those who have shown risky behavior in their choice of mortgages.

Homeowners who are current on their mortgage payments decried what they claim is an unfair plan which only rewards those borrowers who are at risk of losing their homes to foreclosure.

However, some industry experts believed that the Obama Administration is right in focusing its anti-foreclosure program on homeowners who are facing the threat of foreclosure. The main point of the foreclosure prevention plan is to encourage lenders and banks to modify mortgage loans and to alleviate the burden of owners of foreclosed homes.

They pointed out that distressed homeowners should not be blamed and penalized for the current foreclosure crisis. They believed that the increase in the number of foreclosure properties was caused by banks and mortgage lenders who offered risky loan products to homebuyers who are only too eager to buy properties.

Majority of owners of repossessed homes purchased their properties because they believed that buying a house is a good investment.

Data showed that more than two million homeowners have lost their properties to foreclosure and about 10 million may be struggling to meet their monthly mortgage payments. In addition, nearly 6 million homeowners are expected to lose their homes to foreclosure by 2012.

In 2006, the average home median price in the U.S. was $230,000. According to industry experts, banks wanted to lower home prices to make them available to dual-income families by introducing mortgage products, like the option arm loan which permits homeowners to choose their payment scheme or avail of low-payment deals in the first five years with the agreement that they will be increased over time.

Sub-prime loans and predatory lending practices by banks and mortgage lenders have caused some homeowners to default on their payments and started the foreclosures problem which ballooned into a crisis. The foreclosure crisis has had a tremendous impact on women and ethnic minority and racial communities.

Ironically, these same banks and mortgage lenders who hastened the spread of foreclosures were the ones who received more than $379 billion from the federal government to help boost the economy and prevent bankruptcy.

Industry experts hoped that Obama’s anti-foreclosure program will be successful in reviving the economy and stabilizing the housing markets.