Will Obama’s Foreclosure Prevention Plan Actually Prevent Foreclosures?
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Today, President Barack Obama signed the economic stimulus bill into law. The law, which includes a tax credit of $8,000 for first-time homebuyers, is meant to help jump start the economy, but it remains to be seen whether or not it will really work. But the economic stimulus measures in the bill aren’t the only efforts being made to help the economy. Convinced that stemming the tide of foreclosures is vital to economic recovery, the Barack Obama Administration is set to reveal a foreclosure prevention plan tomorrow.
Lower interest rates = lower mortgage payments
Loan modification has long been floated as a way to help borrowers keep up with their mortgage payments. However, there hasn’t been a lot of support for loan modification amongst mortgage lenders. Rumor has it that the new foreclosure prevention plan will focus on subsidies to help encourage mortgage lenders to provide a setup that results in lower mortgage payments through lower interest rates.
The main problem that loan modification has been facing, however, is to do with the fact that many mortgage lenders are reluctant. They are concerned that these loan modifications represent high risk borrowers who may default anyway. This is why the subsidies are being offered. They offset some of the risk involved — and help the mortgage lenders recoup some of the money they don’t get when they lower the interest rate on a home mortgage loan.
Moratoriums and loan modification
The hope is that, between foreclosure moratoriums that are becoming popular and loan modification, it should be possible to at least help the housing market recover. All of the foreclosures are putting inventory on the market and dropping prices and home values. Additionally, there is hope that when mortgage lenders aren’t as concerned with foreclosure, they will in turn start issuing new home mortgage loans, rather than being stingy with credit.
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- How to Fix the Housing Market (time.com)
- Homeowners Facing Foreclosure Have Options (mymortgageinsider.com)
- Obama Launches Economic Whirlwind (abcnews.go.com)
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February 17th, 2009 at 9:52 pm
[…] fact that Barack Obama signed the economic stimulus package into law, as well as the news that a foreclosure prevention plan will be unveiled […]
February 18th, 2009 at 3:01 pm
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