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Obama to Launch Foreclosure Plan in Phoenix

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By : Cassiano Travareli    99 or more times read
President Barack Obama is set to travel to Phoenix, Arizona to launch his foreclosure program. Phoenix was probably chosen because its housing market has been one of the most adversely affected by the credit crisis.

He is expected to set aside between $50 billion to $100 billion for the rescue of homeowners at risk of foreclosure. In Denver, the president signed into law the $787-billion bill from which funding for the foreclosure program would come from.

Under Obama’s foreclosure prevention plan, the annual payment to be paid by borrowers to their mortgage lenders would be reduced from about 38 percent to 31 percent of their annual income. For a borrower paying $19,000 to the lender, his payment would be reduced to $15,500. The decrease in annual payments would also come from the reduction of the loan principal rather than from a reduction in interest rates.

The program would also authorize bankruptcy judges to order mortgage loan modifications in bankruptcy filings. But the modification order would be applied only to mortgage loans taken before Obama’s signing of the $787 bill. Homeowners would also be obliged to notify their lender or service provider before filing for bankruptcy protection.

Obama will discuss some of these as part of his foreclosure program when he speaks in Phoenix, a city that has been battered by an oversupply of housing, slow home sales, subprime mortgages and continued foreclosures.

Arizona foreclosure rates have been among the highest in the U.S., with one unit in 182 homes being foreclosed in January 2009. The unloading of foreclosed properties into the already supply-laden housing market has pushed home prices down to more than half of their price levels in 2007.

Phoenix became a boom city when tourists, retirees and businesspeople flocked to the city, driving real estate developers to build properties and homes to accommodate people coming in. According to Robert Mittelstaedt, business dean of Arizona State University, builders put up properties one after the other believing that there would be people ready to buy them.

Nowadays, residential subdivisions are full of blocks of empty houses. Mittelstaedt estimates that there are about 60,000 unsold homes in Phoenix.

The case of Leroy Ford is just one of many in this city battered by the foreclosure crisis. Ford was recently laid off, so he has been trying to sell his house to be able to survive. But even if he is selling his house for $80,000, almost a third of the $220,000 he shelled out to buy it 2007, no one is buying. Ford’s case is one of many that Obama’s economic recovery plan would try to address.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.

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