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Will Obama's Mortgage Glitch Fix to Help
Borrowers Modify Loans Work?
By Jennifer Franco The fund will be used to subsidize bank's
efforts to modify loans. The government sees this not only as an effort to
help borrowers survive the skyrocketing mortgage dilemma, but also a means
to prevent mortgage values from spiraling down. To some extent, the plan is not entirely new.
The Bush administration already paved the way for programs geared towards
housing fix namely the Federal Housing Association Secure and Hope for
Homeowners. Banks also took part in materializing the programs' objectives,
but despite such compliance, the plan still proved to be ineffective as only
a few loan modification deals were properly closed. The current program developed and espoused by
the Obama administration is an oxymoron for while lenders get to be pampered
with the $75 billion budget that will go to mortgage subsidy, they will be
coerced to comply with the loan modification requests from borrowers. As
stated in the program, the legislation will bequeath bankruptcy court judges
the power to modify loans if banks won't do it. Banks, loan companies and other lending
institutions do not particularly approve of the proposed terms of the
program. To some extent, they consider this as the government's way of
pushing the legislation envelope to the limit. Lenders are forced to choose
between giving in to borrower's request to modify loans with an assurance of
subsidy from the government or stay unyielding to loan modification, but in
the end be bypassed by the legislation crunch. Either way, both would still
lead to the act of lowering interest rates, monthly mortgage payments,
extending loan terms, and reducing principal payments---all of which to the
borrower's advantage. This plan is not completely fool proof. There
are some glitches in the program that might result to more complications in
the future if not addressed by the government immediately. Mortgage
consultants are predicting that lenders will be stricter in their terms and
conditions in lending mortgage. This will exponentially compound the price
and value of housing and mortgage in the US. Likewise there is also the
problem dealing with the declaration of bankruptcy. In order to qualify for
loan modification, borrowers have to declare a form of bankruptcy and this
will lead to an indelible blotch on their credit account. It will restrict
the possibility of getting approved for future mortgage loans. The question here is will Obama's foreclosure
fix of forcing lenders to modify loans for borrowers do the work? The answer to this question is entirely
dependent on a lot of factors. Delinquency rates, economic fluctuations, and
consistency of the government in implementing the programs are just some of
the major complications affecting the success of Obama's housing fix. With
foreclosure rates already reaching more than a million, many remain
unconvinced of the potency of this program.
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