Underwater homeowners: According to CNN Money, President Obama will announce tomorrow new steps to attempt to help struggling homeowners who are currently underwater in their mortgages and unemployed. Depending on the homeowner’s situation:
- this would require lenders to reduce or suspend mortgage payments for up to 6 months.
- reduce the mortgage balance therefore reflecting more accurate, current property values
- refinance through an FHA loan that also gives incentives to lenders for doing so
“These program adjustments will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own,” an administration official said.
Funding for the $75 billion loan modification expansion would come through Troubled Asset Relief Program (TARP) funding. It seeks to reduce homeowner’s monthly mortgage payments to 31% of their pre-taxed income. With nearly 1 in 4 homeowners underwater, the administration is seeking a way to help keep the mortgage crisis from expanding any further and by offering options to struggling homeowners rather than have them walk away from their houses and go into foreclosure.
Many lawmakers feel as though the administration has done little to ease the ongoing crisis in the housing markets where foreclosures continue to increase. Fourth quarter results show that seriously delinquent loans have jumped 21% over the previous quarter. This new mortgage relief program comes one month after the Obama administration announced it would provide housing finance agencies in five states with 1.5$ billion in funding and assistance for markets with very high numbers of unemployed and underwater homeowners.
“Over three years after I’ve held my first hearing about foreclosure, we really haven’t seen any bold, new initiatives coming out of Treasury to address the underlying problem of underwater mortgages,” said Rep. Dennis Kucinich, D-Ohio, at the congressional hearing. “What are we doing to help those people who owe more on their homes than the home is worth?”
