Archive for the ‘Home Mortgage’ Category

There has been much buzz about the new administration’s plans on giving aid to the USA’s ailing economy, a large part of which involving home mortgage refinancing and other foreclosure issues.

The housing industry is one of the financial areas that experienced, and is up to know experiencing a hard hit from the recent economic recession.

With problems being pointed at the previous Bush administration’s failure to allocate funds to address the issue, foreclosures and other issues on home mortgages continue to be a big problem of individual homeowners, communities, and of the country as a whole.

With this, the Obama administration has promised to provide funds to secure distressed properties because of homeowners’ failure to pay for their home mortgage loans. Actions include insuring properties, authorizing the government to purchase some distressed assets, and spend $100 billion to modify home mortgage loans that are troubled and are not being paid for anymore.

On Monday., US Treasury Secretary Timothy Geithner will present in a speech the details on the administration’s plans on allocating the funds which is part of the $700 billion financial bailout program of the government. This is part of the Troubled Asset Relief Program or TARP, which was created last October to provide a solution to the worsening problems of foreclosures and unpaid home mortgages.

At present, part of the TARP fund was already released to Citigroup and Bank of America to provide insurance on troubled assets. The government has already given $301 billion to Citigroup and $118 billion to Bank of America. $50 to $100 billion is set to be used to buy distressed home mortgages from other banks and lenders.

This is to help homeowners prevent foreclosures. The remaining TARP money will be used for a Federal Reserve lending program that will serve as a medium to mop up toxic assets. The US Treasury has already promised to give $20 billion to this program which is called the Term Asset-Backed Loan Facility or TALF.

Part of the new administration’s rescue plan for the ailing US economy is to help homeowners who have mortgage problems. Aside from asking banks to adjust mortgages and release moratorium, the Obama administration will provide assistance to mortgage borrowers even before they miss payment.

Factors such as income and the value of the property will be considered in evaluating the mortgage loan. This has caused people, from normal citizens to high officials, to express different reactions regarding this plan.

From the Home Ownership Center of Greater Cincinnati, the reaction was one of support and approval. As its president Rick Williams said, this move by the Obama administration is fantastic and forward-thinking. According to him, this will prevent people from getting neck-deep in home mortgages and encourages on-time payment.

This is amid the current home mortgage crisis that the country is in. Williams said that there have been too many foreclosures in the past year because people fail to pay their home mortgages. Homeowners get brokenhearted watching themselves walk out of their houses. States who are being hit hardly by the home mortgage crisis are California, Nevada, Florida and Arizona.

Aside from individuals losing their properties, failure to pay home mortgage have other effects such as lower property values, decline of the quality of houses and other similar properties and increase in crime threats.

Homeowners in these particular states are very welcome to the administration’s plan. One of them is Craig McHugh, a sales manager from Chandler, Arizona who recently got unemployed and facing the threat of foreclosure. According to him, although he is still able to pay his home mortgage on time, it is important for Americans to support the government in such causes.

Most negative reactions are coming from analysts saying that people are most likely to take advantage of the program and abuse it by not declaring their true situation and conditions when they are evaluated for home mortgage. According to David John of the Heritage Foundation, this solution is sending the wrong message to people, as it says that the government will solve their problems even if it may be their fault.

Lawmakers desire to make some changes in the home mortgage aid program which should supposedly aid thousands of borrowers and prevent them from losing their homes, but less than 500 applications and merely two-dozen homeowners have been helped so far.

The committee on House Financial Services shall consider the changes as both President Barack Obama and the Congress improve the most crucial steps so far to boost up the crippling housing market. Moreover in the following week, Timothy Geithner as the Treasury Secretary will reveal a new approach to help borrowers and save the crashing financial industry.

The administration wants to use as much as $100 billion for financial bailout money in order to prevent borrowers from leaving their homes. The Republicans are also expected to vote on a proposal to let the government decrease home mortgage rates to 4 percent.

In 2008, programs such as Home for Homeowners were created by Congress were assumed to permit 400,000 worried homeowners to change their risky home loan mortgages for the standard 30-year fixed loan rates with reduced rates. However, out of 451 applications, only 25 home loan mortgages were approved ever since the program began in October. This was regardless of over 66,000 calls from consumers and lenders to the Federal Housing Administration.

In a bill being deliberated through the House committee, a number of constraints on the home mortgage aid program would be revoked so that more people would qualify and the fees would be reduced.

Still, some believe that the changes are not enough. According to a consumer group called the National Community Reinvestment Coalition, the administration should purchase the troubled home mortgage loans by bulk and adjust them so that borrowers can stay in their homes. The administration agrees that this can help stop the financial crisis, even though it may infuriate those opposing to subsidize these delinquent borrowers.

According to Robert Litan of the Brookings Institution, it is impossible to get rid of all foreclosures, but the administration can definitely keep that amount from becoming uncontrollable. In doing so, says the liberal-leaning think tank, decreasing some of the losses next to the securities that are forcing the banks under.

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