Obama Considering Foreclosed Home Prevention Aid
July 15th, 2009 by 
Joseph Smith
Because of continued pressure on the Obama administration to step up its foreclosed home prevention program, President Obama and other administration officials are considering two options to help more distressed American homeowners, especially those who have lost their jobs.
The administration is considering at least two options – loan forbearance and rental agreement.
Under the loan forbearance proposal, financially troubled homeowners would defer their payments for a certain period or during the time of their unemployment. This option would be an effective response to homeowners who can no longer make their monthly home loan payments because they have lost their jobs and have not found immediate replacements.
However, many analysts oppose the idea because of potential unintended consequences. The idea can help more American homeowners, but it can have adverse effects on the housing market. It can also be abused by homeowners, putting a big strain on federal finances.
The other option being mulled by the Obama administration is the rental agreement option, which would allow defaulting homeowners to stay in their properties as renters. They would surrender the ownership of the properties to the lenders or to a government entity that would carry out this initiative.
These foreclosed home prevention options need large amounts of government money and the administration is considering the use of what remains in the $50-billion housing fund previously approved by Congress as part of the national economic recovery program.
If the financial assistance proposal for the jobless comes through, unemployed homeowners would receive two kinds of financial aid from the federal government – their unemployment benefits and their housing stipend.
The Obama administration has been receiving all sorts of pressure and criticism from all sectors of society because of the slow progress of the Making Home Affordable program and the continued rise in foreclosed home inventories.
The foreclosed home prevention program aimed to help up to 9 million troubled homeowners through loan refinancing and loan modification, but at the current pace of loan work-outs, it is doubtful if the program will ever reach its goal.
Recent banking data from the Offices of the Comptroller and Thrift Supervision showed that only around 185,000 loan modifications were completed in the first three months of the year.
Meanwhile, the number of homeowners in default by two months or more has increased significantly.
This week, the Treasury Department has asked the CEOs of the country’s top mortgage servicing firms to step up their loan modification efforts. However, without legislation, the government cannot force lenders to modify loans under the federal foreclosed home prevention program.
