President Obama recently made a trip through five states that were struggling with homeowner delinquency and foreclosures to promote his administrations new plans to help homeowners more effectively dig their way out of financial turmoil.
The challenge with previous government intervention in the housing market is that while they have helped clean up the foreclosure inventory and driven home sales a bit, there are still a large number of homeowners with insurmountable mortgage and delinquency obligations. Reduced borrowing rates, buyer tax credits for first time and repeat buyers, and other stimulus policies have encourage some buying and helped create reduced borrowing costs.
The Obama Administration’s more recent push is to more directly help those borrowers already dealing with major debt and back payments. Low borrowing costs and buyer credits obviously do little to help those already buried in debt. New plans call for more intensive efforts by lenders to work with homeowners on loan modifications that would effectively assist borrowers by allowing them to dig their way out of debt in a way that is more practical and manageable for them.
Obama’s recent talks in states like Nevada and Arizona has centered on plans to send financial assistance through state housing sectors that would then allocate resources within their states to help homeowners. While some applaud the general nature of helping struggling homeowners, others have questioned the merits of state-managed housing support and would like to see similar programs operated on a more national scale.
According to fresh data that has analyzed some of the efforts of the loan modification programs the programs appear to not be working in the long run for many homeowners.
The programs typically begin with some type of loan review and initial trial period to test the potential for long-term success among mortgagees. According to new government data, only about one third of homeowners who go through the trial period are being offered long-term loan conversions by their banks. The Administration was hoping for a 75 percent success rate.
This data suggests that homeowners and lenders are struggling to come up with plans that appease both sides. Lenders obviously feel as though they are owed money for their loans, while the government’s position is to serve as a virtual mediator, trying to balance creditor expectations with the reality of borrowers never being able to pay if they fall too far behind.
Despite good numbers on delinquency and foreclosures for January, many housing sector analysts believe that the long-term challenge of foreclosures will continue unless there is a more permanent and foundational fix in the system. They say there are still far too many homeowners dealing with overwhelming mortgage payments and a lack of income. This could eventually lead to another build up in foreclosure inventory, a drag on the entire housing market.
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