Spotlight on Homeowners Facing Foreclosures

Now that the U.S. election is over, the new president, together with his secretaries, advisers and Congress, can now start to work and focus on rescuing Americans who are facing expulsion from their foreclosed homes.

In 2007, the government launched at least two programs, such as FHA Secure Plan and Hope Now Alliance, to help borrowers minimize their risk of foreclosure. Generally, the programs offered loan refinancing options that reduced monthly payments.

But as the financial crisis worsened, more and more homeowners became unable to pay their monthly payments. More and more people began calling on the government, who bailed out big financial multinationals, to also bail out families who are about to lose their homes to foreclosure.

In response to these calls, FDIC Chief Bair took over one failing bank, IndyMAC, and modified thousands of mortgage loans using a model that could be applied swiftly, facilitating the loan modification process.

According to Bruce Marks, chief executive of the nonprofit group Neighborhood Assistance Corp. of America, Bair’s plan is a more viable modification plan in comparison to the loan modification models applied by previous and existing government programs. Bair’s program uses at least three ways to make monthly payments more affordable: reduction of interest rates, extension of the loan term, or reduction of the principal of the mortgage loan.

Marks, who has prevented the foreclosure of thousands of homes through his nonprofit and advocacy, said that mortgage firms lose money in any loan modification process, but that they lose more if they bring the loans to foreclosure.

To look closely at the root of the foreclosure problem, one realizes that the home loan crisis was largely caused by the failure of financial institutions to determine whether borrowers can really afford to pay back what they were planning to borrow.

Now that the number of foreclosed houses is soaring rapidly, these financial institutions have reasons to go back to the table and determine what borrowers can really afford to pay.