Obama's new plan to stop foreclosures
Michael Hanks, CPA (Retired)Changes were announced March 26th to the Obama initiative to slow or stop foreclosures through the 'Making Homes Affordable' scheme.
This follows the apparent failure of the Treasury Department's flagship 'Home Affordable Modification Program' (HAMP), which has so far successfully processed less than 1% of the 1.7 million potentially eligible cases. HAMP has had a negligible effect on stopping forecloses in California.
The new plan to stop foreclosures has measures aimed at the unemployed. To qualify, the lender has to play ball too by reducing the loan amount by at least 10%; so it is a government backed 'short sale' initiative to a degree. For more information see this Washington Post article.
In many cases in California, a reduction of 10% in the principal debt will not correct the negative equity. That is, even after loan modification, the mortgage debt will be greater than the value of the home.
Reader Comments (1)
Although the mortgage will still be underwater, it's a step in the right direction towards restoring homeowner confidence. It may prevent foreclosures or strategic defaults.
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