Archive for the 'Foreclosure Help' Category

President Obama in Phoenix, AZ today unveiled his administration’s latest attempt to help save millions of Americans from possible foreclosure. The Homeowner Stability Initiative will provide up to $75 Billion dollars in aid to struggling homeowners; those who are facing foreclosure and those who also are “upside down” on their home loans. This new initiative is expected to help as many as 9 million homeowners and will be ready to start helping homeowners as soon as March 4, 2009.

Many economists have identified real estate as one of the driving factors behind the current economic crisis that has not only affected the United States, but almost every other industrialized country. Home prices have been in a free fall, with some areas experiencing close to a 50% drop in home prices over the past 2 years with no end in sight. Add to that a large number of adjustable rate mortgages that have come up for adjustment in interest rates and payments and you have a recipe for disaster. As a result many homeowners have found themselves owing more than their home is worth, or unable to make their housing payments because of the increase in payment, or because of the loss of income.

One of the highlights of the new plan being released on Wednesday is that the government would work with lenders to provide them with incentives to cut monthly mortgage payments. Under the proposal, no more than 31% of a borrower’s income could be used for housing payments. This part of the overall initiative is expected to help an estimated 5 million borrowers who may be facing immediate or near-term foreclosure.

Another 4 million homeowners are expected to benefit those who are paying for houses that are worth less than the mortgage, the so-called “under water” scenario. Under this program Fannie Mae and Freddie Mac, the quasi-government lending institutions that have had close to $200 billion pumped into to help absorb some of the losses, will work with homeowners to modify the loans to reflect the homes current value, the government will subsidize the loss resulting from the modification. The plan itself has provisions for up to a $6,000 buffer in the loss of value of a home.

Recognizing that housing was a key component to the current economic crisis, President Obama is also looking for it to be one of the factors that helps drive recovery. Under the new initiative the government will work to extend home loans available and affordable through a multitude of programs and means – including lowering interest rates, extending loans to more individuals, and working directly with lenders to help unfreeze some of the credit markets.

Whether this plan provides temporary relief or is a long-term solution remains to be seen. Supporters and critics of the plan both point out that this initiative can only do so much – and those who have bought more house than they can possibly afford may still not be able to keep their house even after modifications to original loan.

While this initiative may not help every struggling homeowner, supporters point out that one of the key features of the program is how encompassing it is. Instead of focusing on one type of homeowner it is throwing a wide net to help those in various situations. Even people who are not in immediate danger of losing their home may ultimately benefit under the plan by being able to negotiate lower interest rates or take advantage of the buffer against falling home prices.

Amid a deepening recession, and just one day following the signing of a massive stimulus package, many people see this program as a desperately needed lifetime to many borrowers who have faced difficulty getting their mortgages adjusted as banks and lenders froze most of their credit activities. It is hopes with government incentives and programs in place lenders will be willing to take on more risk and work with homeowners instead of pursuing more foreclosures, which has the ultimate affect of driving remaining home prices even further down.

Read the Full Plan Annouced By the President Obama

Last Tuesday, a Financial Stability Plan has been outlined by Treasury Secretary Timothy Geithner that aims to distribute as much as $2 trillion of private and public funds to the crippling financial system. The plan will be financed within a complex combination of a balance sheet extension of the Fed, private capital and federal tax dollars. Basically the central bank will produce more money in order to finance business and consumer lending and slow down home foreclosures. The plan has four focal points to strengthen financial markets:

Gauging the strength of banks

The government will assess which of the biggest banks in the country will most likely require more capital and which banks are well enough to lend and even endure a worse downturn than projected. Banks who have more than $100 billion in assets will go through a mandatory stress test to determine their balance sheets’ strength. It would involve a solid look at the strength of earnings, quality of assets, strength of present capital, as well as the strength of the management.

Funding for troubled assets

According to Geithner, the Federal Reserve, together with FDIC will team up with the private sector in order to form a market to purchase bad assets, most of which are complex securities backed up by a collection of mortgages, foreclosures and other different kinds of loans. Offering the financing that private markets cannot currently provide will help open a market for housing-related assets and prevent foreclosures that are at the heart of the crisis.

Lending kick-off

The government pledges as much as $1 trillion to lubricate the market for business and consumer lending, which increases on a $200 billion plan the Federal Reserve is getting ready to launch.

The money would supply financing to private investors to purchase securities funded by auto loans, credit card debt, student loans, and housing and commercial mortgages. New banks can get new money to loan if these can sell their loans to a strong secondary market.

Relief from foreclosure

The Treasury Secretary has also promised to provide assistance to homeowners by decreasing mortgage rates and payments to deal with the foreclosure crisis.

Many believe that the Financial Stability Plan should be assembled quickly as the foreclosure problem deepens. John Taylor of the National Community Reinvestment Coalition believes that the foreclosure crisis is the source of the economic recession and keeps on contributing stress to the economy. The administration should move quickly to put an end to the foreclosure crisis.

The entire U.S. banking industry and millions of foreclosure-troubled homeowners are awaiting Treasury Secretary Timothy Geithner’s bailout plan. They expect that his plan is vastly different from that of Henry Paulson, as Paulson’s plan largely failed because he focused only on helping financial institutions.

Treasury spokesman Isaac Baker said that Geithner is working with legislators to create an economic rehabilitation plan that would increase investments and create jobs. The plan would also help banks and other financial institutions so that they could provide credit to businesses and families.

Geithner has promised substantial changes in how the second half of the Troubled Asset Relief Program (TARP) funding would be spent. While Paulson succeeded in helping over 300 banks across the country, including billions of investments in AIG, Bank of American and Citigroup, he failed to require these institutions to provide loans to avert further foreclosures.

Geithner has not released the details of his bailout package. But he is known to be considering several options, as reported variously in the media. One of these is the bad bank rescue operation. This requires the formation of a government-funded unit that will acquire toxic assets. White House economist Larry Summers said Geithner will also tap private investors to contribute to the fund.

Another option is asset insurance. The Treasury Department will insure a big portion of lenders’ loan assets, as what has been done in 2008 with Bank of America and Citigroup. The third option is an enhancement of the Term Asset-Backed Securities Loan Facility (TALF) launched in 2008 by the Federal Reserve Bank. This TALF could be extended to include mortgage loans lost to foreclosures.

The other options are debt for equity swaps and additional capital investments in banks. But according to legislators, funding for these options would only be approved if banks are required to lend to reduce the number of foreclosed properties in the market.

During the election campaign and his pre-inauguration days, Obama promised homeowners and legislators that he would prioritize foreclosure mitigation measures. Surely, Geithner’s bailout plan will include the president’s demand.

The U.S. Department of Housing and Urban Development recently allotted $91 million dollars to address the Florida foreclosures. The amount is expected to help the entire state, according to Gov. Charlie Crist.

With the continuous flooding of foreclosures in the housing market, the need for government assistance is undeniable.

A year of extra attention and effort failed the Congress in resolving the foreclosure crisis.

Barack Obama, who is just a few days away from being inaugurated as the 44th and the first African-American U.S. president, is facing his first big test in the Senate. Democratic and Republican senators have been debating whether to give him the second $350 billion of the Troubled Asset Relief Program fund for his own foreclosure prevention program.

The Congress is left with merely less than two weeks to decide on whether the second half of the $700 billion bailout fund would be released or not. Supposedly, the fund is to be used to address the persisting foreclosure crisis in the country.

As President-elect Barack Obama waits for the response of Congress to his request for the release of the remaining $350 billion of the Troubled Asset Relief Program fund approved in 2008, he reaffirmed his election campaign promise of using a big portion of the fund to help homeowners avoid foreclosure and help small business owners save their operations.

Just minutes after President Bush said at a news conference that President-elect Barack Obama just had to “ask” if he needed the remaining $350 Billion bailout funds allocated for foreclosure prevention, Obama did just that. Now Congress has to vote within a 15-day period whether to approve the request.