Bank Owned Foreclosure Prevention Program Revived

by on Foreclosure Help

One of the most disappointing bank owned foreclosure prevention program initiated by the federal government is the Hope for Homeowners. Since it was launched eight months ago, the program has managed only to help just one distressed homeowner secure a loan with affordable payment terms.

Homeowners who are on the brink of foreclosures would be happy to know that the Obama Administration is making an attempt to revive the program to fulfill its intended target of helping borrowers save their properties from bank owned foreclosure.

President Barack Obama has signed a law that will simplify and lower the program’s cost for borrowers and lenders. Under the program, lending institutions are also eligible to receive incentive payments from the bailout funds of the government.

Meanwhile, some investors who used to oppose the Hope for Homeowners’ requirement that they waive mortgage balance of borrowers if the value of the property is less than the total mortgage they owed, is now praising the program.

American Securitization Forum deputy executive director Tom Deutsch said that institutional investors who own securities-backed mortgages are willing to write down the principal balance in return for the homeowner to refinance or modify his loan under the Hope for Homeowners program.

Investors are open to the possibility of incurring more losses as the poor performance of the housing market, increasing number of foreclosures and unemployment rate and decreasing property values left them with no choice but to work with homeowners to work out loan terms.

According to the market data, an estimated 1 percent of homeowners currently own properties less than the total amount they owed for their mortgages. And the percentage of homeowners who are underwater is expected to increase as home values continue to fall.

Valparaiso University School of Law assistant professor Alan M. White said that the best predictor of the foreclosure crisis is negative equity. The Hope for Homeowners program aims to restore the equity of thousands of homeowners whose property values declined drastically.

White said that homeowners who have negative equity on their homes would not make an effort to save their properties from bank owned foreclosure.

Real estate industry officials believed that the success of the bank owned foreclosure prevention program will depend largely on how the revised version is implemented.