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Mortgage Modification Most Effective Way to Combat Foreclosures

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By : Cassiano Travareli    99 or more times read
The current administration is severely criticized for doing very little in stemming the tide of foreclosures. Despite arguments and claims from the White House that several actions have already been performed for a year, the number of foreclosure properties continue its monumental climb, and more American homeowners stand to lose their homes.

The administration is pressured to make a direct government intervention or action to this crisis, and adopt lobbied programs which call for the government’s direct involvement in the foreclosures issue. One of these programs includes the plan initiated by Sheila Bair who heads the Federal Deposit Insurance Corporation.

Working closely with the Treasury Department, this plan includes a restructuring plan for delinquent mortgages which will result to affordable monthly payments. This can be achieved through lower interest rates, loan term extensions and deferred payments. The program plans to standardize payments to a third or two-fifths of the homeowner’s income after taxes.

The plan would need the full support of lenders and banking institutions. Here is where the government is urged to step in. By acting as a guarantor to certain percentages of the restructured loans, the government would share in the losses should the homeowner fail in their restructured mortgages and finally end up in foreclosures. The government is urged to use part of the $700 billion bail-out fund for this purpose.

Some detractors fear that this plan might be exploited by some homeowners who would deliberately default on their payments and take on the risk of foreclosures. Some would be lead to believe that participating in this bail-out plan could give them a much lower mortgage payment scheme.

The plan however, will only be applied for homeowners whose current income flows would make their mortgages unaffordable. Experts say that this scenario might be possible, but should not be considered a deterrent in pushing for the implementation of this project. With the flood of foreclosures sweeping across the nation, a concrete plan of action is what the nation needs right now.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.

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