New Foreclosure Relief Programme Showing Results
The new foreclosure relief programme Making Home Affordable that has been recently launched by the Obama administration is already showing results. Incentives are being offered to all concerned parties to enable either modification or refinancing and ultimately thus preventing further foreclosures.
The borrowers who qualify for this plan and continue to be current on their loans will get a handsome amount $1,000 per year taken off their principal over a period of five year. The lenders and their servicers would also be gifted $1,000 for each application that is processed to enable either modification or refinancing of the loan. If the application is approved they would get another gift of $1,000.
These measures are a big change from the previous ones when the servicers were not offered anything. Rather they got cash rewards from the lenders for proceeding with foreclosures.
Of big help is a recent law that protects the servicers from legal suits that frustrated investors might bring against them for proceeding with changes in term of mortgages. This potential threat has for a long time been a Damocles Sword hanging over the investors. Any moment it could have come crashing down. None of the servicers wanted to modify or refinance loans fearing the risk of legal moves from investors. This protective law and similar other legal measures are slowing changing the attitude of the lenders and their servicers towards the borrowers said Jeff Perdue of Orlando Home Mortgage a brokerage firm that deals mainly with the new relief programme. He said, “We finally have something we can really work with. It’s not a watershed by any means, but it is revolutionary compared to Hope for Homeowners. At least it’s making a dent.”
Although some improvement has been made the details are yet unknown. The Treasury has not released figures on number of applications and approval figures.
In the first three months of the programmes’ debut 120,000 borrowers have undergone modification of their loans while 3,650 have refinanced into new loans. But given the staggering total figures the numbers are too modest to have any real impact on the entire scenario. It is apprehended that before the year draws to a close there will be 2.4 million more foreclosures according to the estimates drawn up by Center for Responsible Learning. But others feel that this figure is on the modest side – it could be worse because 12% of 45 million mortgages across USA were running delinquent during the first quarter of 2009.
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