The Obama administration is under increased pressure to make some changes to the current mortgage relief program as the housing crisis is not showing any major signs of letting up.
The administration’s $75 billion program is designed to pay mortgage lenders to modify mortgages for borrowers who have found themselves in financial trouble. The modifications are designed to lower monthly payments by as much as $500. Unfortunately, according to the U.S. Treasure Department, fewer than 200,000 mortgage borrowers have had any permanent changes to their loans. The program was designed to help as many as four million borrowers by 2012. At this rate, however, the program will not reach its goals nor will it help stabilize the current housing market. According to one credit company, the program would have to prevent more than three million foreclosures this year alone in order to help home prices increase just a bit.
The program, which has been named “Making Home Affordable,” got off to a “slow start,” according to administration officials. They say it can still reach its full potential if given a chance. One of the problems they say is that the lenders did not begin enrolling eligible borrowers into the program until the summer of 2009. That was months after the program was began. By that time, the main reason for foreclosures was the rising unemployment in the United States rather than the risky mortgages that borrowers had. That means borrowers have less money to apply to their mortgage payments, in which case the program has little effect on them.
The administration is under pressure to expand the program so it helps more unemployed borrowers who find themselves in precarious situations. Officials are also under pressure to expand the program to help homeowners who find themselves “upside down” in their mortgages, meaning that they owe more on their loan than what their home is worth. Representative Edolphus Towns of New York is leading the charge to help more homeowners who find themselves in trouble due to unfortunate financial circumstances. He says the program should be more efficient and effective regarding assisting struggling homeowners.
At least half of the homeowners who have received relief under this current program have asked for help because their income dropped as a result of a job loss or some other reason. Unfortunately, many of these people do not qualify for help from the program because they do not have an income. Some of the pressure comes from housing advocates who say some of the money should help those borrowers by offering short-term loans and other financial assistance. They also say borrowers who owe more on their homes than their market value should also receive some type of assistance under the program.
The administration has discussed making changes in the current program, but they have not provided any details as of yet.
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