Obama to set afloat Much-Awaited Foreclosure Plan
President Barack Obama’s administration has moved up the launching of his much-awaited foreclosure prevention program due to pressure from Congress. Members of Congress have been very concerned about thousands of Americans being forced out of their homes everyday.
Congress was disappointed when Treasury Secretary Timothy Geithner announced that the Obama administration’s foreclosure program would be delayed by several weeks.
To respond to the concerns, White House spokesman Robert Gibbs has announced that President Obama will be traveling to Phoenix, Arizona to present his administration’s foreclosure mitigation plan. Phoenix was chosen because its housing market has been one of the most adversely affected in the country. Its home prices have fallen by 33 percent compared to the first quarter of 2008.
A number of large banking multinationals have also announced three-week moratoriums on their mortgage loans in response to calls made by Congress. Barney Frank, chairman of the House Financial sets Committee, censured banking chief executives for their contribution to the foreclosure crisis. Jamie Dillon, chief executive of JPMorgan Chase, wrote Frank and told him his company is willing to help the government design a loan alteration scheme that would help troubled borrowers at risk of foreclosure.
The other mortgage giants expressing their commitments to freeze foreclosures for three weeks as Obama readies his foreclosure program are Citigroup, Bank of America and Wells Fargo. The government-controlled mortgage corporations Fannie Mae and Freddie Mac will also continue their foreclosure moratorium schemes.
Guy Cecala of Inside Mortgage Finance Publications said that most mortgage service firms will also impose moratoriums. The moratoriums however will be restricted to single-family homes and small residential complexes.
Many analysts doubt if Obama’s foreclosure plan can keep large numbers of troubled homeowners out of foreclosure. Mortgage lenders have refused to implement any program that would reduce principal balances and further increase their losses from loan modifications.
Bert Ely, a financial consultant in Virginia, said that any loan refinancing or alteration plan would only be successful if it considers the non-mortgage debts and financial difficulties of the borrowers.
Several administration officials have been saying that they are nevertheless completing the foreclosure plan. It has been speculated that Obama’s plan would focus on a standard refinancing program that sets a mortgage borrowers’ monthly payments to at most 31 percent of their gross monthly income.
Obama’s foreclosure plan could also incorporate the loan alteration form implemented by Federal place Insurance Corp. Chairperson Sheila Bair to help mortgage borrowers of the failed California-based mortgage corporation IndyMac Bank in 2008.