Some people have already touched on this subject, but I feel as though this goes hand in hand with the theme of supply based economics failing the market as of lately. Emergency Homeowners' Loan Program is going to be loaning out up to 30,000 loans for $35,000 on average, according to the Department of Housing & Urban Development. In order to qualify for these loans, you have to be at least 90 days delinquent on your mortgage and be pending a foreclosure, as well as be able to show that they can basically get back on their feet in two years. There are three main points that I want to hit today: who gets the loan, how to get the loan, and what is wrong.
So, in order to get the loan, you have to be on the brink of foreclosure, 90 days behind on your mortgage payment, and have sustained severe loss in income. So basically, Frank and Dodd want to give loan to a group of people that have absolutely no credit worthiness whatsoever. Why in the world would these two want to loan money out to only people that are so far gone they would need a miracle to get saved? What I am trying to say is that this money will not help people get out of the near foreclosure point, and good luck trying to get these loans paid back. The money would be much better used if smaller amount were given to people on the verge of purchasing, but need assistance with closing costs, etc. We need to stimulate economic growth, not extend inevitable foreclosure processes, which leads me to my next point.
How are people supposed to actually get this loan? According to the HUD’s own website, you need to be way behind, suffer a huge salary cut, pending foreclosure, and somehow be able to prove that you will be able to financially support yourself and pay back the loan in two years? Name one person you know that can say, “yes I am unemployed, but I can prove that I am going to be re-hired and financially sustainable in two years.” Finding someone in that position, as well as meeting the other criteria set for this program, may prove difficult.
We need to increase demand, plain and simple. An increase in demand will lead to an increase in home prices. With underwriting standards as tight as they are, people are needing to come up with more money to show vested interest in the property, which is holding many potential buyers back. Proactive steps toward stimulating economic activity in the housing market will do much more than simply allowing people to stay in their home another year. It's unfortunate, but people that fit the criteria needed for the Emergency Homeowner’s Loan Program are in no position to benefit from the loan. Either change the criteria, or simply allocate the funds toward a more economically stimulating project.
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