Slamming the Door on Foreclosures

by Josie Raymond · 2010-03-26 14:49:00 UTC
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Yes we can -- get long-awaited help to quell a foreclosure crisis that continues to ravage the country. A new plan announced by the Obama administration today will help an estimated three to four million unemployed borrowers keep their homes.

Basically, the Treasury Department is going to muscle lenders into giving borrowers some room to breathe. Much like Obama's student loan proposal, the plan will force banks and other lenders to cap payments, this time at no more than 31 percent of the borrower's income (generally just unemployment insurance) for three to six months. The benefits come from tweaks by the Treasury Department to the Home Affordable Modification Program and the Federal Housing Administration program, and all $50 billion for the plan has already been alloted through the emergency bailout plan, Troubled Asset Relief Program, or TARP.

The symbolic beauty of the plan is that it recognizes that the cause of foreclosures (and poverty...and hunger...) isn't laziness; it's the absence of employment (or, many times, employment at a living wage). Especially as the recession has dragged on, the homes being foreclosed aren't the McMansions that people got for $0 down; they're the modest family homes where people are trying but struggling. The Treasury Department said today that it was trying to help people who were behind on payments "through no fault of their own."

Obama's plan also aims to help the fifth of mortgage-holders who watched the value of their home fall in a terrible real estate market until it is now lower than what they owe on the mortgage. Lenders will be offered incentives to cut the loan balances for these "underwater" borrowers. Other key elements include the restructuring of second mortgages for the half of all struggling homeowners who have them and favorable refinancing terms for people current on their loans.

More more information, or to see if you're eligible for assistance, visit MakingHomeAffordable.com.

Photo credit: edkohler

Josie Raymond has reported from the streets of the South Bronx, written for several magazines that folded (not her fault) and fixed thousands of typos.
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