Fresh Drive By Obama Administration to Fight Foreclosures
Record figures of foreclosure and unemployment have struck the housing market. Hence the Obama administration has announced the launching of two new programs that will help ease the crisis. HUD secretary Shaun Donovan has announced that the government will introduce a refinancing program of the FHA (Federal Housing Authority) whose mortgages are much higher than the value of their homes. Donovan also announced a second program which is an emergency home owner’s loan program intended to help unemployed home owners retain their homes.
Donovan said that the fresh initiatives were in response to the July figures which were atrocious. The July figures, he said were worse than what the government and the market expected and so the government was concerned. The Obama administration has been worried about the housing situation ever since it assumed office and has launched a slew of programs intended to combat the onslaught of foreclosures and help boost sales of homes. But till now millions of dollars sunk in these programs has not produced the much desired results.
According to National Association of Realtors, in spite of the efforts of the administration, the purchases of homes declined by 12% in June, sales of old homes fell by 27% in July and sales of single family homes touched a 15 year low. Further bad news on the housing front is that foreclosures have risen substantially, housing prices have plunged to record lows and mortgage defaults are being committed by 1 in 5 home owners. These figures do not indicate a recovery in the economy.
The culprit behind all these negative developments is unemployment. The country’s unemployment rate has touched 9.5% and many are without work for more than 26 weeks. As such, the administration is keen to begin an FHA refinance program to help struggling home owners pay their mortgages and help the unemployed retain their homes.
The government would like to keep maximum number of unemployed in their homes apparently in a bid to help the unemployed. But the real interest of the government is to control the number of homes in default so that they do not pile up and add to the figures of foreclosures.
The economic melt down and recession in 2008 began with the fall of the housing market and the government is anxious that the housing market should not be allowed to slip again to cause further injury to the economy. But unemployment figures threaten any positive outcome due to the Federal programs. Thus it remains to be seen whether the programs will make a dent in figures of foreclosures in the near future.