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Fights on Foreclosures Cannot Help Lift Stocks

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By : Leticia Carvalho    99 or more times read
In the recent weeks, Wall Street has been able to cut a few of its losses because of the plans to forestall foreclosures. The said plans were made to help lots of US homeowners to slow down, if not entirely stop, their bouts with foreclosure properties.

The plans were initiated by the US government after concerns on the alarming increase of foreclosure homes grew. The programs were designed so borrowers can reassess and restructure their debts. Establishment of new mortgage guidelines will also be a part of the proposed program.

Federal Housing Finance Agency Head James Lockhart said that mortgage giant Fannie Mae will also be tasked to alter and change its mortgage terms. However, such rearrangements will only apply to borrowers who have filed for bankruptcy. Borrowers who have missed more than three payments will not be considered.

The proposed loan modifications are targeting to offer assistance through the following methods:

  • Offering of lower interest rates
  • Putting off initial principal payments
  • Keeping new payments within 38% of the borrower’s income

The above-mentioned percentage is perceived to be dramatically higher than the traditional rates. However, Lockhart stated that the FHFA is hoping that mortgage firms in the private sector would adapt the said terms set by the Fannie/Freddie program.

Meanwhile, mortgage firms such as Citigroup, Bank of America and JPMorgan Chase have formally announced their plans of assisting their borrowers with their accounts. Borrowers who have accounts likely to be included in their list of foreclosure properties will be given a chance to rework their debts.

But it seems that Lockhart’s reports on the reworking of the housing market economy have failed to alter the stock market. The industrial average of Dow Jones closed yesterday with a loss of 177 points. S&P 500 and NASDAQ have fallen 500 points and 36 points respectively.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.

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