Distressed homeowners find hope
With the recovering housing market, the real estate bubble of 2006 seems like a distant nightmare. And what a nightmare it is as 10.8 million homeowners are still living in homes that are much cheaper than their mortgages. These homeowners are also less likely to refinance their homes due to low rates and more likely to default. Yet with suffering comes hope as the Obama Administration has started rolling out programs to provide incentives to banks for them to reduce the amount of mortgages for these distressed homeowners. This new development might seem good for both sides: Lenders gain confidence to homeowners since bringing them up from their situation provides them more boost in sticking with their mortgages; homeowners can start building their equity and reduce their monthly payments.
However, despite the initiative, Fannie Mae and Freddie Mac are still not onboard. Ed DeMarco, head of the government unit that oversees these two, is quite resolute with not signing the decision as, according to him, this would only encourage folks to default internationally causing taxpayers’ dollars.
Despite the refusal, though, recent report shows that if Freddie Mac and Fannie Mae starts writing down mortgage values, the fed would be able to save up to $2.8 billion, and, not to mention, help 284,000 homeowners.
Of course, the main issue of this current decision from the government is to really determine who’s deserving of the pardon. It might be logistical but it is nevertheless important to discern homeowners who are deepest in debt. As much as it might provide good fortune to those deserving, others might cry foul. Hence, defending this move will prove to be difficult as it entails several issues, good will being the least of them.
And so with Ed DeMarco still head of the FHFA, it will be unlikely for a helping hand to appear at the doors of many underwater homeowners. Furthermore, despite the recent nomination of Congressman Mel Watt, who in the past voiced his support for the program, to replace DeMarco, it is still too soon to say whether Watt will be able to garner support to earn him the post. Still, even with the kind intent of the program, everything eventually boils down to politics.