Republicans Urged to Vote for Government Foreclosures Program

by Peter Vernon on General

Republicans in the Senate are being urged by American homeowners and housing advocates to help the government foreclosure homes program by passing the bankruptcy reform law.

Under the government foreclosures program, more loan modifications can be completed and more Americans could be saved from losing their homes to foreclosure if judges are given the power to order lenders to modify the mortgage loans of homeowners filing for bankruptcy.

As the Republicans in the Senate keep on stalling, more and more Americans are being forced out of their homes due to private lender and government foreclosures.

Moody’s has estimated that 3.4 million mortgage borrowers will default in 2009 and that 2.1 million will be forced out of bank forclosed homes. These estimates are even too optimistic according to some analysts as they were based on the assumption that President Obama’s government foreclosures program will succeed.

The success of the government foreclosures program however is minimal if one of the key schemes of the program is not carried out – the loan modification scheme. The loan modification scheme sets up qualifications and guidelines for troubled homeowners. It also gives cash incentives to both lenders and homeowners to work out reduced monthly payment plans that can be sustained by the borrowers.

The authority of judges to order loan modifications will force lenders to prefer loan modifications over risking their mortgages to be brought to bankruptcy courts. The bankruptcy reform will also give distressed homeowners a last recourse to save their homes if their lenders refuse to modify their loans or if they cannot afford to pay even reduced payments.

President Obama’s government foreclosures program was intended to help 3 to 4 million homeowners avoid foreclosure by reducing their monthly payments. has estimated that up to 2 million loans will be modified under the government foreclosures program and up to 1.25 million loans will be modified under bankruptcy processes.

If the Senate Republicans do not pass the bankruptcy reform, all the loan modification estimates would fall by over 50 percent. Some political analysts claim that Republicans are concerned about impacts of the reform on political fund raising, as the American Bankers Association and financial lobby groups remain fiercely opposed to the reform.