The Obama administration is serious in putting a halt to the foreclosure crisis. It plans on allotting $50-100 billion in funds to implement measures that will address the present housing situation. However, what these measures are and how they will be carried on is still not very clear.
Members of the Obama team are determined to find specific ways on how the bailout funds can be of assistance to troubled homeowners. On Tuesday, Secretary Timothy Geithner of the Treasury is scheduled to discuss possible strategies for the use of the remaining $350 billion bailout fund.
At this point, it is still not certain if the amount will be used to address the foreclosure problem. What is certain right now is that the Obama administration will give priority to the housing industry more than the previous administration did.
Addressing the foreclosure crisis is not a simple task. The problem is overwhelming and previous efforts have not been so successful.
Under the Bush administration, Federal funds were not used to resolve the housing situation. Instead, mortgage companies were encouraged to implement loan modification.
The Obama team plans on expanding the streamlined loan modification program. The program, which is headed by the Federal Deposit Insurance Corporation, promotes the reduction of monthly payments by either cutting down interest rates, extending the duration of loans or suspending principal payment.
Since the program started, at least 10,000 loans have already gone through modification. Additional 20,000 delinquent loans are expected to receive assistance. Mortgage companies target to cut down payments to a maximum of 31% of the monthly income of a borrower.
According to Director Larry Summers of the National Economic Council of Obama, all banks that are going to receive part of the bailout funds will be obliged to promote programs that will help prevent foreclosure. The government is planning to grant incentives for loan modification plans. It will also allot funds as backstop if ever a borrower misses payments again. If the proposal pushes through, it is expected to help approximately 1.5 million homeowners prevent home foreclosure.
In whatever foreclosure prevention measures the government plans to implement, time is important. Foreclosure incidents increase by the second and quick action from the administration can make a big difference.
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There are homeowners that have purchased properties when they could afford them but adverse economic circumstances caused them to default or experience financial hardship. They are motivated by emotion to keep their homes from being forclosed but the economic reality is that some of their homes are now worth 40.00% of the original value and this translated into dollar amount could be in the $500,000.00 or above in negative equity.
Is there a way that the whole system be re-started like re-booting a computer? Some people have invested heavily in real property as a hedge against inflation. They have placed their entire future hoping to retire by selling the properties at some future date, pay off in full the other properties from proceeds of the sale and live off the rental income.
How can you help these unfortunate investors who will face being destitute because they no longer have the options that they once had?
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