Obama Expands Foreclosed Homes Auction Mitigation Program

Time icon May 15th, 2009 by Autor Joseph Smith

The administration of President Obama has announced additional schemes to help troubled homeowners who do not qualify under the Making Home Affordable program. The schemes will expand the government’s foreclosed homes auction mitigation program.

Barack Obama

The schemes will help homeowners find ways to avoid foreclosure through other means, such as selling homes or giving back the houses to the mortgage lenders. If a homeowner could no longer afford to keep his house from being sold in a foreclosed homes auction, he should find ways to preserve his credit record so he can still apply for a mortgage loan in the future when his employment and finances improve.

One of the proposed ways is to encourage deeply troubled homeowners to sell their houses in a short sale. Short selling involves getting approval from the mortgage lender to sell the delinquent property at a price lower than the mortgage balance. The mortgage lender agrees to accept the sales proceeds as a full payment for the mortgage loan, preventing the filing of a foreclosure case.

Another recommended scheme is the deed-in-lieu transaction in which the defaulting homeowner returns the delinquent property to the mortgage lender. The lender accepts the returned property as full payment for the mortgage balance, also preventing the filing of a foreclosure case.

Short selling and deed-in-lieu schemes have been used to prevent foreclosure before, but the federal program will facilitate the process for troubled homeowners. Standards and systems would be developed to make the processes more efficient.

HUD Secretary Shaun Donovan and Treasury Secretary Timothy Geithner are set to meet with several homeowners who have successfully reduced their monthly payments under the Obama administration’s program to cut down the number of houses sold in every foreclosed homes auction across the country.

A government official said that the Making Home Affordable program has benefitted a total of 50,000 homeowners in the first two months of the program.

Short sales are typically used by borrowers to keep their credit records clean, but oftentimes planned short sales have not been successful because of the long process involved and the lack of mortgage personnel to process short sales quickly.

The administration’s Making Home Affordable program was designed to help up to 9 million distressed homeowners save their houses from foreclosed homes auction through loan modification and loan refinancing. As of date, 14 mortgage lenders have committed to participate in the program.

The expansion of the program is expected to help seriously troubled homeowners survive the harsh effects of losing houses to a foreclosed homes auction.

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