Tuesday, June 30, 2009
A $75 billion plan to prevent millions of families from losing their homes has become bogged down as a result of mortgage lenders reacting too slowly to the crisis, leading some experts to wonder if banks are deliberately undermining President Barack Obama’s effort. Joel Naroff, of Naroff Economic Advisors, told USA Today, “Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay. No one will admit they’re doing this.”
Under the plan unveiled in February by President Obama, the federal government is offering mortgage companies $1,000 for each loan they agree to modify, then another $1,000 a year for up to three years. Since then, however, millions of homeowners have slipped into delinquency and foreclosure, due to the slow response by lenders to applications that were filed months ago. Government and banking officials blame the problem on companies not hiring enough staff to process the flood of requests for mortgage adjustments.
Although the Department of the Treasury claims the program has resulted in more than 190,000 mortgages being refinanced, more than a million other homeowners have already been notified by their banks that foreclosure proceedings are underway. The situation is only expected to grow worse, according to the Center for Responsible Lending, which reports that 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
If the mortgage rescue plan fails to stem the rate of foreclosures, the economy make take even longer to rebound, as more Americans lose their homes and housing prices continue to plummet.
-Noel Brinkerhoff
Paper Avalanche Buries Plan to Stem Foreclosures (by Peter Goodman, New York Times)
Foreclosures Grind on as Lenders Fail to Modify Loans (by Stephanie Armour, USA Today)
Obama Sets $75 Billion Plan To Stem Foreclosures (by Deborah Tedford, National Public Radio)
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