In a bid to keep homeowners in their homes even if they are unable to meet repayments, the Obama government had unveiled foreclosure prevention measures a few months back. The expectation was that once the housing market is given a helping hand to stabilize, by preventing foreclosures and supporting homeowners, it would help the economy regain its footing too.
However, it appears as though the government’s foreclosure prevention measures will not achieve the targets originally set.
Although housing sector analysts and policy followers gave their blessings to the measures, it seems unlikely that the 4 million borrowers who were originally expected to benefit from these changes will really derive significant benefits. The governmental measures included offering incentives to lenders to take cut backs on repayments in a bid to lighten the pressure on homeowners, thus making it easier for them to avoid foreclosure. But the measures depended heavily on the cooperation of lenders which many experts believed was an unrealistic expectation given the economic conditions.
Responding to criticism about the inefficacy of these measures, Democrats have chosen to take the bull by the horns once again with modifications to the earlier Making Home Affordable program. In what may seem a backtrack by the administration, policy makers have clarified that not all borrowers are being targeted by the measures. They said that these measures are aimed at helping responsible homeowners with the ability to recover adequately to make repayments.
With the modified plans, lenders will be able to identify trustworthy borrowers and offer better repayment terms and repayment cuts to enable these homeowners to give their best. Lenders may be required to give 3 to 6 month repayment holidays to unemployed homeowners in order to allow them to stabilize their finances without letting the accumulated debt burden grow larger. Principal reduction is also a possible measure which lenders may need to include as part of these policy changes.
While critics are still doubtful if these modifications will suffice to curtail foreclosures and bring some much needed optimism in the housing markets, the measures are seen as positive by others. Those who support these measures point out that the policy marks a complete turn around in the government’s stance on foreclosures with support becoming more evident for the borrower than the lender. They hope that the approach of helping borrowers retain their homes will boost the confidence levels of both homeowners and lenders.