Lisa Simpson
Jan 29,2010
In: Foreclosure

With Government aid Failing the Time has come for Foreclosure Moratoriums and Debt Relief

There is no second opinion that government Obama aid has been failing.

There is no second opinion that government aid has been failing. As such it is time to do some rethinking about foreclosure moratoriums and debt relief. President Obama is now changing his focus shocked into action by the victory of Brown in Massachusetts, Congress abandonment of his health care plans and fears of a public backlash.

Instead of further cuddling the banks he is now attacking them with strong words that have caused stocks to reel and progressives to cheer. There are indications of naming another policy but how far it will be translated into reality is anybody’s guess.

The government is planning to add more teeth to the relief programmes that have so far failed to deliver. Easier loan terms are being initiated keeping in mind those who cannot keep their commitments because of job losses.
Currently the foreclosure rates in all its stages continue to spike with prime mortgages joining in. Over 25% of all the residential mortgages are now underwater – the loans being heavier than the worth of the properties. Million more families are threatened. The housing crisis has in no way been fixed. Not doing anything can no longer be a choice.

The political arena will soon be sucked in by the spill over of the crisis unless the Obama team bestirs itself.

Modification of loans should be done properly. So far the government laid-out plans have not been effective because the banks and financial entities gain more by foreclosing than otherwise – despite government incentives.
The New York Times has blamed the Making Home Affordable plan responsible for only prolonging the pain of the families at risk. It has given rise to false hope among those who simply cannot afford their houses. Instead of waking up to ground realities the borrowers are pouring more money into mortgages that have become white elephants. They could have done better by facing realities, pushed aside the past and started anew. The scheme is however helping the banks to cover up the true condition of their balance sheets and slowing down recovery process.

The Washington Post reported that the relief programme of the government to be sputtering and many are at risk of losing the assistance that they have already got. The Los Angeles Times went a step further and said that out of 700,000 loans only 31,382 have been modified permanently by the close of November. The government, desperate for success threatened recalcitrant servicers with fines.