Obama decides that unemployed foreclosure loans need another $ 3 billion

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. A Housing and Urban Development program that is intended to help unemployed borrowers who’s mortgages are delinquent got one more $ 1 billion. Experts are really just worried that banks instead of homeowners will benefit more from this.

Stopping foreclosure has turned into a huge money pit

The Hardest Hit Fund was started to help states make their own foreclosure prevention programs in February, helping those with unemployed foreclosures. The Wall Street Journal reports that the fund is presently financing initiatives in 10 states. The money is part of $ 50 billion earmarked for housing aid under the Troubled Asset Relief Program. 17 states could be able to take advantage of the $ 2 billion, including the District of Columbia, that have unemployment rates super high. HUD will get $ 1 billion for giving bridge loans with no interest up to $ 50,000 to those eligible who have to make mortgage payments for two years.

Hardest Hit Fund is nothing

The housing market, which has led the way out of past recessions, is dragging the current economic recovery down. The New York Times reports that interest rates are at record lows, but too few can afford to purchase or refinance. Everyone who’s an unemployed homeowner has a very difficult time selling their home. The housing market gets worse with foreclosures make neighborhood values go down. The Hardest Hit Fund will help 140,000 borrowers if it really works right. With the new money, both the Hardest Hit and HUD programs could eventually help about 400,000 borrowers — a drop in the bucket set against 14.6 million unemployed and 3 million unemployed borrowers contemplating foreclosure.

Easy comes for mortgaged lenders

It is likely that Obama has just helped a bunch of banks out more than unemployed homeowners with these new programs. The Hill reported that senior fellow at the Center for American Progress, David Abromowitz said that unemployed borrowers shouldn’t be the only ones getting hit; banks should be hit too. Principal reductions on loans or other major modifications don’t have to be made by mortgage lenders which is a big problem. As outlined by Abromowitz, lenders should match funding and make concessions. Dean Baker of the Center for Economic and Policy Research told The Hill that with so many individuals with underwater mortgages, the new funding is unlikely to do much good. Dean said for the programs to work there has to be a reasonable expectation that homeowners could have some equity in their property at the end or they will lose their homes anyway.

Find more details on this subject

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