Obama administration to expand housing plan
The Obama administration is expected to expand its mortgage aid program on Thursday, announcing new measures that would help homeowners avoid a blemished credit record even if they don't qualify for other assistance.world Updated: May 14, 2009 11:22 IST
The Obama administration is expected to expand its mortgage aid program on Thursday, announcing new measures that would help homeowners avoid a blemished credit record even if they don't qualify for other assistance.
The new initiatives are expected to include ways to allow borrowers to avoid foreclosure by selling their properties or giving them back to lenders, according to people briefed on the plan who declined to be identified because it has yet to be announced. One way would be to encourage a "short sale," in which the home is sold for less than the amount owed on the mortgage but the lender considers the debt paid off. Another option is a deed-in-lieu of foreclosure _ in which the borrower gives the property to the lender to satisfy a delinquent loan and to avoid foreclosure proceedings.
Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan are scheduled to appear Thursday morning with some borrowers who have benefited from the government's housing aid program launched in March. An administration official said more than 55,000 offers have been made to modify borrowers' loans in its first two months.
Short sales are often seen as preferable to foreclosure because they don't harm a borrowers' credit record as much as a foreclosure, but real estate agents have complained that the process can drag out for months. "The problem is it's never clear who in a bank has the authority to approve a short sale," said Howard Glaser, a mortgage industry consultant in Washington and a former HUD official. Federal standards "would speed the process for buyers and sellers by making it more efficient."
The administration estimated earlier this year that as many as 9 million borrowers will be helped through its "Making Home Affordable" initiative, including up to 5 million borrowers who are refinancing loans and 4 million who are modifying mortgages at lower monthly payments.
So far, 14 companies representing about three quarters of the mortgage market have signed up and are in line to pocket a portion of $50 billion in incentives to lower borrowers' monthly payments so they can stay in their homes. "We are confident that banks and servicers will move as quickly as possible to modify these loans to avert additional foreclosures in the coming months," Donovan said earlier this week. Meanwhile, the pace of the foreclosure crisis continues to accelerate.
The number of U.S. households faced with losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, foreclosure listing service RealtyTrac Inc. said Wednesday.
More than 342,000 households received at least one foreclosure-related notice in April. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since Irvine, California-based RealtyTrac began its report in January 2005.
April was the second straight month that more than 300,000 households received a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.
The April number, however, was less than 1 percent above that posted in March, when more than 340,000 properties were affected.