Obama Pumping 3 Billion Into Unemployed Foreclosure Prevention

The Obama administration is pumping $ 3 billion into programs to help the unemployed with foreclosure prevention. The Hardest Hit Fund would going to be doubled with an additional $ 2 billion was announced last week to be put to the fund. $ 1 billion was given to a program to help unemployed borrowers who have delinquencies on their mortgages called Housing and Urban Development. Experts are really just worried that banks rather than homeowners will benefit more from this.

Money pit with foreclosure prevention

To fend off an epidemic of unemployed foreclosures, the Hardest Hit Fund was launched in February as a way to help states design their own foreclosure prevention programs. 10 states are taking advantage of this initiative right now, reports the Wall Street Journal. The money is part of $ 50 billion earmarked for housing aid under the Troubled Asset Relief Program. The $ 2 billion infusion will be distributed to housing agencies in 17 states, plus the District of Columbia, that have the highest unemployment rates. HUD will get $ 1 billion for giving bridge loans with no interest up to $ 50,000 to those eligible who need to make mortgage payments for two years.

Hardest Hit Fund is nothing

The economic recovery is going down because of the housing market, which historically has helped all the recessions. Hardly everyone can refinance or buy although interest rates are at record lows, reports the New York Times. Unemployed homeowners who live in communities where values have fallen sharply are often unable to sell. Their foreclosures weaken neighborhoods and create a vicious cycle that further undermines the housing market. Until now, the Hardest Hit Fund had been projected to help about 140,000 borrowers. 14.6 million unemployed are looking at foreclosing, meaning the 400,000 unemployed helped through the HUD and Hardest Hit programs is hardly anything.


Easy comes for mortgaged lenders

It is likely that Obama has just helped a variety of banks out more than unemployed homeowners with these new programs. Banks should be hurting along with unemployed borrowers says David Abromowitz who’s the senior fellow at the Center for American Progress and had an interview with The Hill. He said the main problem with the funding is that mortgage lenders don’t have to make principle reductions on loans or any major modifications. Abromowitz suggested that lenders should be required to make concessions and possibly even match funding. Those with underwater mortgages wouldn’t be helped too much with extra funding, says Dean Baker of the Center for Economic and Policy Research to the Hill. Dean feels like that homeowners need to have equity in their homes at the end or they’ll lose them anyway making it something that won’t work.

Additional reading at these websites

Wall Street Journal


online.wsj.com/article/SB10001424052748704901104575423493999575302.html

New York Times

nytimes.com/2010/08/12/business/12treasury.html

The Hill

thehill.com/blogs/on-the-money/banking-financial-institutions/114349-banks-to-benefit-most-from-white-house-program-to-stave-off-foreclosures