New state-based efforts on helping the housing crisis and minimizing foreclosures are being implemented by the Obama administration. Though these efforts are yet to be tested, many are looking at them as better options as compared to the federal level programs on foreclosures.
The country has been hit by lots of economic bad news. Thursday reports an increase in unemployment rates as more and more unemployment insurance are being claimed; almost half a million more filed for insurance claims last week. The housing industry, where the financial crisis started out, is also not faring well.
The government has been trying to help the housing market but it seems the efforts are falling short. The number of Americans unable to hold on to their homes is continually increasing. Even home prices have failed to stabilize.
For the 17th month in a row, America saw more than 300,000 foreclosure filings in July. According marketer of foreclosed properties, RealtyTrac, these filings include bank repossessions, auction notices, and defaults. Last month alone, a total of 92,858 homes have been repossessed.
Because of a high number of repossessed homes being put up for sale, house prices are further declining and more borrowers are ending up underwater. An estimate by Moody’s Economy.com reveals that the number of lost homes this year will only decrease slightly from last year’s – from two million to 1.9 million.
Since the Obama administration launched its main program on home foreclosures over a year ago, only 398,198 loans were permanently modified. And only $321 million was spent of the $30 billion allocated for this purpose.
Why the low numbers? Banks, homeowners, lenders, and the government are pointing fingers.
The homeowners applying with their banks or a mortgage service company say that procedures are too confusing and paperwork is being lost. Banks, on the other hand, complain that the government keeps on changing the rules. The government is looking at the banks and accusing them of poor customer service.
The programs’ inspector general says the Treasury Department can also be faulted. He says the reason that the program has not made any remarkable dent in the foreclosure filings is that clear goals and benchmarks were not set.
Many say that the only real solution to the housing crisis is to urge the banks to lower the principal loan balance instead of loan modification. But since banks are iffy because this will incur more losses for them, the Treasury fears that pushing them to do so might just give them reason to pull out of the program. In the end, no push for such solution was done.
Currently, state-based efforts are helping the unemployed and the underwater borrowers in 18 states as well as the District of Columbia. A total of 140,000 borrowers are expected to be aided by the $2 billion allocated for such state-based programs.
Though these state programs may most likely grant more cash assistance than loan modifications, there is doubt that they will be able to push for principal reductions. Many though are looking closely at these programs and crossing fingers that they will make better progress on the housing crisis than the federal level programs.