Will Obama"s Mortgage Glitch Fix to Help Borrowers Modify Loans Work?
Obama is taking plans to fix the alarming foreclosure crisis in America in great lengths.
The President already pledged to allocate $75 billion dollars to launch the government's foreclosure prevention program in the hopes of halting the declining mortgage ownership rate in the country.
The main objective of the program is to convince lenders to modify loans of borrowers who are in danger of losing home ownership preservation.
The fund will be used to subsidize banks' efforts to modify loans.
The government sees this not only as an effort to help borrowers survive the ballooning mortgage dilemma, but also a means to prevent mortgage values from spiraling down.
To some extent, the plan is not entirely new.
The Bush administration already paved the way for programs geared towards housing fix namely the Federal Housing Association Secure and Hope for Homeowners.
Banks also took part in materializing the programs' objectives, but despite such compliance, the plan still proved to be ineffective as only a few loan modification deals were properly closed.
The current program developed and espoused by the Obama administration is an oxymoron for while lenders get to be pampered with the $75 billion budget that will go to mortgage subsidy, they will be coerced to comply with the loan modification requests from borrowers.
As stated in the program, the legislation will bequeath bankruptcy court judges the power to modify loans if banks won't do it.
Banks, loan companies and other lending institutions do not particularly approve of the proposed terms of the program.
To some extent, they consider this as the government's way of pushing the legislation envelope to the limit.
Lenders are forced to choose between giving in to borrower's request to modify loans with an assurance of subsidy from the government or stay unyielding to loan modification, but in the end be bypassed by the legislation crunch.
Either way, both would still lead to the act of lowering interest rates, monthly mortgage payments, extending loan terms, and reducing principal payments-all of which to the borrower's advantage.
This plan is not completely fool proof.
There are some glitches in the program that might result to more complications in the future if not addressed by the government immediately.
Mortgage consultants are predicting that lenders will be stricter in their terms and conditions in lending mortgage.
This will exponentially compound the price and value of housing and mortgage in the US.
Likewise there is also the problem dealing with the declaration of bankruptcy.
In order to qualify for loan modification, borrowers have to declare a form of bankruptcy and this will lead to an indelible blotch on their credit account.
It will restrict the possibility of getting approved for future mortgage loans.
The question here is will Obama's foreclosure fix of forcing lenders to modify loans for borrowers do the work? The answer to this question is entirely dependent on a lot of factors.
Delinquency rates, economic fluctuations, and consistency of the government in implementing the programs are just some of the major complications affecting the success of Obama's housing fix.
With foreclosure rates already reaching more than a million, many remain unconvinced of the potency of this program.
The President already pledged to allocate $75 billion dollars to launch the government's foreclosure prevention program in the hopes of halting the declining mortgage ownership rate in the country.
The main objective of the program is to convince lenders to modify loans of borrowers who are in danger of losing home ownership preservation.
The fund will be used to subsidize banks' efforts to modify loans.
The government sees this not only as an effort to help borrowers survive the ballooning mortgage dilemma, but also a means to prevent mortgage values from spiraling down.
To some extent, the plan is not entirely new.
The Bush administration already paved the way for programs geared towards housing fix namely the Federal Housing Association Secure and Hope for Homeowners.
Banks also took part in materializing the programs' objectives, but despite such compliance, the plan still proved to be ineffective as only a few loan modification deals were properly closed.
The current program developed and espoused by the Obama administration is an oxymoron for while lenders get to be pampered with the $75 billion budget that will go to mortgage subsidy, they will be coerced to comply with the loan modification requests from borrowers.
As stated in the program, the legislation will bequeath bankruptcy court judges the power to modify loans if banks won't do it.
Banks, loan companies and other lending institutions do not particularly approve of the proposed terms of the program.
To some extent, they consider this as the government's way of pushing the legislation envelope to the limit.
Lenders are forced to choose between giving in to borrower's request to modify loans with an assurance of subsidy from the government or stay unyielding to loan modification, but in the end be bypassed by the legislation crunch.
Either way, both would still lead to the act of lowering interest rates, monthly mortgage payments, extending loan terms, and reducing principal payments-all of which to the borrower's advantage.
This plan is not completely fool proof.
There are some glitches in the program that might result to more complications in the future if not addressed by the government immediately.
Mortgage consultants are predicting that lenders will be stricter in their terms and conditions in lending mortgage.
This will exponentially compound the price and value of housing and mortgage in the US.
Likewise there is also the problem dealing with the declaration of bankruptcy.
In order to qualify for loan modification, borrowers have to declare a form of bankruptcy and this will lead to an indelible blotch on their credit account.
It will restrict the possibility of getting approved for future mortgage loans.
The question here is will Obama's foreclosure fix of forcing lenders to modify loans for borrowers do the work? The answer to this question is entirely dependent on a lot of factors.
Delinquency rates, economic fluctuations, and consistency of the government in implementing the programs are just some of the major complications affecting the success of Obama's housing fix.
With foreclosure rates already reaching more than a million, many remain unconvinced of the potency of this program.