Foreclosures Threatening 80% of Borrowers
Photo by Ddpavumba
Out of one hundred defaulting house owners, eighty are not qualified for programmes pertaining to loan modification. Thus only 20% are eligible for the government programmes as per a report released by Treasury while foreclosures are threatening 80%.
A whopping 4.6 million house owners are lagging behind two months on their mortgage dues. This makes them eligible technically for the flagship programme of the government – Making Home Affordable. But 80% of them cannot avail of it. As per the report of the Treasury merely 900,000 actually are eligible for the programme.
Dean Baker of Center of Economic and Policy Research (co-director) said that this exposes the weakness of the programme – too few people have been targeted. He said, “If 900,000 are eligible, and this is your main programme for helping underwater borrowers, we know that not all 900,000 can be helped, this doesn’t look very ambitious”.
The numbers prove again the glaring shortfall in the programme that the President had started off with much hype in the early part of 2009. It has not come anywhere near its goals. This makes the voice of the critics louder regarding its ineffectiveness. Baker added, “This programme, in its design, is set up to help a very small portion of people”.
Under this programme – Making Home Affordable – those house owners who are current on their mortgage dues but facing risk of default in near future may also be eligible. The data given by the Treasury did not include this group.
The borrowers are kept out of this government programme for multiple reasons – type of loan and the property. Rental units, ‘manufactured’ houses with FHA loans and also houses bought with loans taken from Department of Veteran Affairs are not included in the programme.
Those whose incomes are calculated to be affordable are not deemed to be eligible. No serious note is taken about whether for that particular borrower it is really so.
The motivation behind this programme is to see that the borrower can afford the monthly housing payments. The definition is that the payment on dues has to be less than 31% of the income of the house owner. Taken into consideration are various other debts apart from housing, that might be on the cards – car loans, education loans, dues on credit cards etc.
Borrowers who have walked away from their properties are also considered ineligible. It is assumed that they do not need the house.
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