Congress and the President are considering additional bailout funds to keep homeowners from foreclosing on the mortgages. Under the Home Affordable Modification Program, or “HAMP”, about 116,000 homeowners have modified their home loans. However, with trillions lost in home equity, many homeowners have already been foreclosed on because they could no longer make monthly payments due to unemployment. Until they obtain new jobs, they will not be able to afford any mortgage at all and will remain both homeless and unemployed.
The situation is critical in the views of many housing and employment market analysts. They feel that unless the housing market crisis is abated, there can be no increase in jobs, and vice versa. The two problems are very much intertwined.
The chief economist for the AFL-CIO has suggested reinstating a moratorium on foreclosures until the job market is again on solid feet. His view is that this action would force banks and lenders to renegotiate the presently defaulted loans, giving homeowners a way to keep the home. The reform bill that Congress passed in December included three billion to help unemployed homeowners keep their payments current.
Meanwhile, President Obama and his Democratic allies are looking at the possibility of a mandatory loan balance reduction program. This may be the only remaining option to save what will certainly be a greater foreclosure in the coming months.
Additionally, discussions are currently being held regarding the problem of the more stringent financing requirements for buying a new home to replace one that was foreclosed. With a foreclosure on a homebuyer’s credit record, lenders do not want to extend financing to them. Unless some accommodation or loan programs are created for those potential homebuyers, then many of the foreclosed homes will remain empty eyesores on every block in America.
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