President Obama main objectives that underpin his foreclosure management policy are to:
Push for more loan modifications, in terms of which mortgage agreements are altered so that borrowers can afford to service them under the conditions in which they find themselves.
Ratchet up the rate of approval for re-financing applications.
Help more Americans obtain loans to enable them enter the property market for the first time.
The primary piece of legislation empowering Obama’s dreams is the Helping Families Save Their Homes Act that he authorized back in May 2009. This Act built on the earlier Hope for Homeowners Act that was designed to bring relief to underwater American households, whose homes had become worth less than their outstanding mortgages, following the extended slump in property values.
The parcel of legislation is supposed to help ensure that banks agree to lenders’ applications for re-financing arrangements that lower their servicing obligations to affordable levels. This is subject to a qualification that stipulates that the revised residual amount may not exceed market value by over 5%. A second string to Obama’s strategy involves offering financial incentives to cooperating lenders when they agree to modifications that cap monthly payment at no more then 31% of monthly income. Under these rules the United States Treasury is empowered to provide additional funding to both the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) for the purpose of financing more new home loans.
Critics of the President’s far-reaching and well-intended policy directives emphasize that, despite the hype surrounding them, the rules have in reality actually had little impact on the problem, and contain fundamental flaws. Those on the other side of the debate deny this, and are at pains to point out that the program is starting to produce results. In the latter’s defense, HAMP does appear to have achieved a reversal in plummeting house prices, and stemmed the increasing foreclosure rate in some States at least.
But those who seek to badmouth the program argue that but a few American families whose modifications qualified in principle actually got their hands on Obama’s pot of gold – because his ideas are not founded on solid economic principles. Despite all this, Washington continues to show a brave face to the media and public, insisting that the number of loan modifications already granted is an important milestone along the road to recovery, and that the President’s strategies will work out and achieve the goals he set himself to soothe the nation’s foreclosure pains.
On which side of this important debate do you belong? Which way will the future lead?
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