There have been a fresh slew of programs aimed at assisting home owners who are facing foreclosure caused by unemployment. The Home Affordable Unemployment Program is a new program from the federal government targeting unemployed home owners to combat the danger of foreclosures for sale.
Around $1 billion is being allotted for redeveloping distressed properties. Another target of the program is to enable unemployed home owners current on their mortgage to get a forbearance period of at least 3 months. Monthly mortgage payments during this period will be reduced or canceled completely.
The program is based on one such effort in Pennsylvania which has been going on since 1983. Loss of income due to loss of job is the number one cause of foreclosures. Unemployment rates hover around 10% and even touch 17% according to broader measures.
Most other government programs have met with limited success. The HAMP (Home Affordable Modification Program) has had more drop outs than those who have achieved permanent modification. Re-default rates are very high. This is not surprising as those who have been unemployed for long and don’t have much money are not likely to pay up the re-modified mortgage. Many who can save money through reduced mortgage payments have been unable to do so because of credit reasons or because their homes have lost value and they do not have enough equity to refinance leading to foreclosures.
Many areas of the US are in a race to spend money under the various Federal programs as they stand to lose the funds if they don’t spend funds quickly enough. With around $1 billion at stake, localities are trying to overcome inadequate staffing, a down turn in the market and federal problems to buy foreclosures before the deadline period arrives. Around $6.9 billion has been allocated for relief under various federal programs against foreclosures.
In the first round in 2008, states were given 18 months to spend $3.9 billion allocated through the Neighborhood Stabilization Program. In 2009, stimulus funds of $2 billion were added to the program. The final $1 billion was released recently by the Obama administration. In order to keep up with the strict deadline, states are turning away from buying single family homes and moving to multi family properties and rental housing in order to stabilize neighborhoods.
High rates of mortgage delinquencies not only cripple the housing market but cause blight of entire neighborhoods as home buyers and businesses are unwilling to invest in such areas. The Federal government is taking steps to help individuals and neighborhoods avoid the impact of foreclosures.
