Foreclosure as One of Obama’s Top Priorities

by Peter Vernon on General

Preventing foreclosure may be one of President-elect Barack Obama’s top domestic priorities, but he also has other housing-related concerns on his agenda too. Alleviating homeowner’s taxes and acceding to the change of the mortgage-closing procedure are also in Obama’s to do list.

Avoiding Foreclosure

During his presidential campaign, Obama promises that his Treasury and Housing departments would be more assertive in adjusting the mortgage terms as the feds would collaborate with the states to organize extensive mortgage reform to combat the prevailing foreclosure problem.

Obama aims government and businesses to obtain broadly accepted rules in deciding who can avail of a loan modification and who cannot. That would mean a change from the current and time-consuming process of deciding on loan modifications on a case-to-case basis.

In addition, Obama wants lenders to delay the foreclosure proceedings until 90 days if the borrower is bargaining. He wants bankruptcy judges to make some changes in the mortgages of debtors in the repayment plans of Chapter 13 as well. Although lenders have opposed this move, they have no power to fight it since banks are receiving hundreds of billions of dollars in bailout money.

Tax Proposals

Obama intends to have a 10 percent tax credit on mortgage interest for non-itemizers since many homeowners do not get tax breaks for their interest payment on mortgage debt. The tax credit would be refundable as filers could acquire the money even though they do not owe any income tax.

Moreover, he suggests allocating $25 billion to the states so that they can provide money to local governments that raise property taxes in order to purchase important services like police, fire and schools.

Closing Cost Changes

Last November, the federal housing department made changes in the good faith estimate of closing costs (GFE) procedures. GFE is the document that records the estimated fees and taxes on a mortgage deal. Starting 2010, the GFE will be regulated into a three-page document, while estimated fees will have to be precise and brokers will have to reveal their compensation.

Even though challenges are in the way of getting government entities and private businesses to work together in the same direction, there is still optimism in the administration’s plans in foreclosure prevention, tax proposals and closing cost reform.

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