Unemployment rates have risen to 9.5% as of the end of June 2009. As unemployment rates have worsened, so too have foreclosure rates. A higher foreclosure rate is a natural consequence of people losing their jobs. No job means no money to pay the mortgage. While some may be able to cover their mortgage payments for a short time after losing their jobs by using their savings, eventually these savings also dry up and families do look at the real possibility of foreclosure.
The Obama administration has already been promoting a program for the past few months to loan modify and loan refinance under its making home affordable program. The result of this program, however, has not been as dramatic as hoped for. Though many have already gained the benefit of loan modifications under said program, the numbers are not as many as had been hoped for.
Under the Obama administrations’ making home affordable program, homeowners would be able to modify their loans so that the monthly mortgage payments would not exceed 31% of a homeowner’s gross income. The main qualification for a homeowner to qualify for this loan modification program, however, is that the homeowner is currently employed or has a regular income. These existing programs do not help the jobless because they don’t have enough income to pay for the mortgage even at a reduced monthly payment. Hence, the situation of unemployed homeowners is making the job of loan modification even harder than it already is.
Per CNN report, the Obama administration is scheduled to meet with 25 service providers, who are struggling with a flood of troubled borrowers, in Washington, D.C. this week to discuss the program’s implementation and problems as too many homeowners are still struggling with monthly mortgage payments.
The mortgage crisis started with sub prime borrowers defaulting on their loans. It is now fueled by rising unemployment, which is causing borrowers with good credit to default on their mortgage loans. Loan modification prevention efforts are still failing to stop the tide of foreclosures. That’s why there’s a proposal by some experts for the administration to do more. The proposal by some advocates involves giving the jobless a housing voucher with their unemployment check to cover their housing costs.
Senator Jack Reed (D-R.I.) plans to introduce a bill that calls for providing mortgage assistance payments to the unemployed.
Senator Jack Reed’s statement reads: “Soon, I plan to introduce foreclosure prevention legislation that would provide mortgage assistance payments to homeowners……… This program, administered by state housing finance agencies and other entities, would be for homeowners who have lost income through no fault of their own and who have reasonable prospects of employment. Qualified homeowners will receive grants or loans to help make past due mortgage payments and to pay a limited number of future payments. Homeowners whose circumstances simply make keeping the home impossible would be eligible for relocation assistance.”
It is still not clear if this bill, when introduced in Congress, will pass. Some lawmakers see this effort as a waste of taxpayer money since it has low success rates. This contrary view maintains that measures to help people avoid foreclosure will only prolong the agony of the homeowner by using taxpayer resources to continue paying for mortgages that are just not sustainable by the homeowner. This view advocates that the best way to help the unemployed is to not give handouts of financial assistance to homeowners but simply promote policies that will create jobs.
What do you think? Either way, you can have your voice heard by calling your representatives in Congress expressing your support for one or the other if and when the bill is introduced in Congress.
(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old. Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com.)
