Lisa Simpson
Sep 25,2009
In: Finance, Foreclosures

Obama Plan to Save Homeowners is Yet to Gather Steam

obama

The US is going through a challenging phase. The country is in the grip of a deep recession and the housing industry is the worst affected. To bail out the real estate sector, the Obama administration had come up with a plan by which loans would be modified. However, the plan is yet to gather steam.

Now the Treasury department will be meeting officials of the banks to hasten the process of loan modification. The department sent a letter to about 25 lending institutions last month requesting them to meet the department secretary. The topic to be discussed is loan modification. It is obvious that the government will want to know the reason behind the delay in mortgage modification. There are many homeowners who are at risk of losing their homes. The government will want to know why these homeowners are not receiving the benefits of the ‘Making Home Affordable’ program.

It may be noted that lending institutions will receive $1,000 for each loan that is modified yet they are sitting tight. A primary reason is loan modification is a time-consuming process. While the mortgage companies delay the service, foreclosures show no signs of abating. The rising wave of foreclosures is definitely posing a threat to the economic revival. Four years ago the number of foreclosures stood at 800,000. Now the number has increased by leaps and bounds and stands at 3.5 million.

Experts agree that the economy will show signs of recovery only when foreclosures stop. Hence, Senator Jack Reed of Rhode Island is pushing the Treasury department to stop foreclosures. Foreclosures are not merely restricted to Florida or California. They are happening everywhere. Mark Zandi of Moody’s Economy.com, says homes of 15 million people have a negative equity. This means they owe more on their homes than what these spaces are worth. It is expected that many of these people will default on their loans.

The Obama administration has not been able to handle the situation. It has not been able to stop the rising tide of foreclosures. Although it made a lot of promises to improve the lot of the homeowners after assuming office, so far it has not been able to do much. It announced the “Making Home Affordable” program and assured that loans of large numbers of people will be modified. However, expectations have fallen short.