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Donovan Explains Plan to Slow Down Foreclosure Listings

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By : John Cutts    99 or more times read
Housing Secretary Shaun Donovan sounded very optimistic about Obama’s program to slow down foreclosure listings when he appeared before the Senate and testified about how the administration will spend $75 billion to help millions of homeowners. He told senators the full details of the program will be released at program launching. He also said the administration is expecting to process millions of modifications quickly, hoping to slow down the rate of foreclosure listings by April.

Donovan explained that Obama’s program to reduce foreclosure listings will help at least three types of troubled borrowers. Homeowners who are still current with their monthly payments, but who have other debts such as credit card loans and car loans can apply for modifications to reduce their payments and make themselves safe from foreclosure listings.

Homeowners whose loans are 5 percent higher than the current value of their homes can also apply for refinancing if the mortgages are owned or serviced by Fannie Mae and Freddie Mac. There is also a loan restructuring program for homeowners whose loan balances are up to fifty percent higher than the current value of their homes.

Meanwhile, in the House, leading lawmakers rescheduled a vote on the proposal to give bankruptcy judges the authority to order mortgage banks to modify loan terms for borrowers threatened by foreclosure listings. The loan modifications would lower interest rates and loan principal for heavily indebted borrowers. The vote was discontinued when a group of Democrats opposed the proposal, fearing that it would send a negative message to homeowners who are trying their best to pay their monthly payments despite hardships and threats of bankruptcy.

Despite opposition from critics, groups of politicians and the mortgage industry, most Democrats and consumer advocates have supported the proposal. They believe that without forceful prodding from the government, mortgage lenders will not work out loan modifications, as what happened under the Bush administration.

Notwithstanding the opposition, Democrats in the Senate praised Obama’s administration for its efforts to use $75 billion to save 9 million troubled American homeowners from foreclosure listings. The program is expected to stop additional foreclosures that would further depress home prices and further hurt the country’s efforts to rise above the current economic downturn.

Analysts say that the record 10.2 percent decrease in home prices as reported by the Commerce Department in February should send a strong message to the critics of President Obama’s program to give their support if they can not propose a better alternative.

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