Donavan Urge Banks to Take Aggressive Measures to Stop Foreclosures
A day after US President Barack Obama unveiled his foreclosure prevention initiative, Department of Housing and Urban Development (HUD) Secretary Shaun Donavan urged banks and other financial services institutions to take aggressive steps to ensure the success of the $75 billion program.
The foreclosure abatement initiative includes refinancing arrangements that will provide a chance to almost 9 million borrowers to reduce their mortgage payments.
The initiative will greatly help homeowners who are on the threshold of foreclosures, those making payments but are struggling to do so regularly and those who are at risk of defaulting.
In addition, the Treasury Department has pledged another $200 billion to help home mortgage providers Federal National Mortgage Association and Federal Home Loan Mortgage Corp. maintain low mortgage rates.
Furthermore, the foreclosure prevention initiative also includes incentives of $1,500 for distressed homeowners and $500 for lenders provided that loans have been modified before they defaulted.
The incentives are designed to encourage lenders to offer home refinancing to homeowners whose mortgages surpassed the fair market value of their properties.
Donovan, during an interview on the NBC program “Today Show”, said that the foreclosure problem started as a crisis in the mortgage market and spread to become an employment crisis.
He pointed out that the Obama Administration is certain that there are enough requirements to ensure and sustain heavy bank refinancing. This, he added, could mean a great deal to help owners of distressed properties.
He explained that those eligible for mortgage refinancing are homeowners who have good credit. He admitted that there are homeowners of distressed properties who would not benefit from the foreclosure prevention initiative, citing in particular investors owners who purchased homes they never occupied.
Meanwhile, Federal Deposit Insurance Co. Chairman Sheila Bair said that the foreclosure prevention initiative will have a significant impact on the Obama Administration’s effort to curb the number of repossessed homes.
In an interview on the ABC television show “Good Morning America”, Bair empathized with homeowners who are good mortgage payers who feel that they are being left out from the initiative and that the Obama Administration is instead rewarding distressed homeowners for their risky behavior.
She pointed out that what is important right now is to put a stop on foreclosures and halt falling home prices which could all lead the way to stabilizing the housing market.
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