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Governors’ Mixed Reaction to Foreclosure Plan

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By : John Cutts    99 or more times read
While some governors applauded President Barack Obama’s foreclosure plan, other governors who are mostly Republicans criticized the plan as unfair.

Jon Corzine, the Democratic governor of New Jersey, supports Obama’s plan. He said his own mortgage renegotiation plan for the state’s troubled homeowners can use funds from Obama’s program. New Jersey has created a foreclosure prevention program in which the court orders both lender and borrower to enter into a mortgage renegotiation process.

Another Democratic governor, Bev Perdue of North Carolina, said her state’s foreclosure program can mesh well with Obama’s program. So it is with Washington State Governor Chris Gregoire. She said Obama’s plan would add funding to what she has developed as a mediation program for homeowners and lenders.

President Obama’s $275-billion plan would enable homeowners at risk of foreclosure to negotiate with their lenders for lower monthly payments. The plan would also infuse funds to Fannie Mae and Freddie Mac to enable them to refinance mortgage loans and reduce monthly payments to about 31 percent of borrowers’ monthly income.

But while Democrats see something helpful in the Obama plan, Republican governors such as South Carolina Governor Mark Sanford are doubtful about Obama’s program.

Sanford says that most homeowners across the country have been paying their mortgages. He says he is concerned about equity for homebuyers who have been faithfully paying their monthly amortizations without help while seeing their irresponsible neighbors being rescued with tax money.

Sanford also criticizes court-ordered loan modifications and the significant involvement of Fannie Mae and Freddie Mac in the foreclosure plan. He says that the modification of mortgage contracts by judges is not in line with American laws and that Fannie Mae and Freddie Mac are two of the largest institutions that are to blame for the housing crisis.

President Obama’s foreclosure plan is multi-pronged. It has provisions for borrowers who are not yet delinquent and for homeowners whose properties have been foreclosed but still have sources of income for monthly payments. It also has provisions for mortgage lenders and for various federal agencies. It also has incentives for both borrowers and lenders for sustaining their efforts to avoid further foreclosures.

Borrowers are given up to $1,000 per year that can be applied for balance reduction if they can sustain their monthly payments. Mortgage lenders are also given a cash incentive of $1,000 for every loan modification according to Obama’s modification eligibility guidelines and additional cash incentives if the borrower stays current with payments.

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