Foreclosure Crisis has reached Unprecedented Proportions
It’s indeed a very critical situation in the US. The current economic downturn has been a severe one. Unemployment is at its peak and people have been losing jobs very quickly. Besides mass unemployment, he foreclosure rate has been very high. Last February, the federal government came up with a scheme to help troubled homeowners. The program went off to a slow start but finally picked up pace towards the middle of 2009.
Loans for 650,000 people were not modified until late last year. Now the Treasury Department has told mortgage lenders that they would have to pay a penalty if they did not use government funds to help troubled homeowners. A study says that lenders are miffed at this and feel they do not have enough incentives to revise loans they have issued to homeowners.
The author of the report, Diane E. Thompson, says that the foreclosure crisis has recently reached unprecedented proportions. Already, millions of home have been foreclosed while many others are expected to be foreclosed upon in the coming years. The values of homes have also gone down significantly. Layoffs, too, are common and homeowners are already buried under the increasing pressure of loans. The only solution is to revise the loans in several cases. Foreclosures are, after all, costly for, not only the community, but also the lenders. Yet, the lenders have little or no drive to help people.
According to the Mortgage Bankers Association, the numbers of delinquent loans have seen a sharp increase In fact, one in seven loans is delinquent. A year ago, the number was only one in 10. One in 22 homeowners are about to lose their homes as well. The number was far less a year ago – one in 34.
The Treasury department has recently released a report which says that borrowers, who are in the experimental phase of the Home Affordable Modification Program (HAMP), should be helped and their loan revisions be made permanent. According to the report, this would aid in the stabilization of the home market. It would also provide much-needed relief to troubled homeowners. Aiding troubled homeowners is sure to give a much need boost to the lagging economy.
However, volunteers who work for homeowners, say that is clearly not enough. The president of the Center for Responsible Lending, Michael Calhoun, says that the foreclosure prevention program has done little to mitigate the crisis. Foreclosure rates have increased, which is another reason the economic growth has been slow. If people are to be helped or saved from foreclosure, then the trial loans should be converted to permanent as fast as possible.
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