US real estate: Foreclosure prevention program not achieving its target
U.S. President Barack Obama announced his administration's foreclosure prevention program in February 2009, expectation being that "as many as 3 to 4 million homeowners to modify the terms of their mortgages."
In the United States, one in 438 homes was in foreclosure last month, according to RealtyTrac, a real estate data firm.
The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms up to 40 years. The government has set aside $75 billion in subsidies to entice mortgage companies to participate. To complete the program, homeowners need to make three payments and provide proof of their income, plus a letter documenting their financial hardship.
One year later, only 170,000 successful cases were registered, which, typically, got lower mortgage payments by more than $500 a month.
Why there is such descrepancy?
Getting banks and homeowners to complete the process has been far more difficult than administration officials anticipated. About 90,000 homeowners have lost their mortgage aid under the government's foreclosure prevention plan, and many more are at risk of losing the help, according to Treasury Department data released last Friday. Some borrowers did not turn in required documents to prove they qualified for the program, others applicants earned too much under the government's formula, while others made too little and were unlikely to be able to keep up even with the lower payments.
Homeowners, under this foreclosure preventon porogram, have to submit to banks in charge of implemtation of the aid package pay stubs and tax returns, among other forms. According to reports, about 1 million borrowers have had their payments lowered under the federal program, but some 500,000 have passed the required three-month threshold without receiving a permanent loan modification. And applicants have no idea how long they have to wait, since no timetable is provided by banks.
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