Obama administration expands mortgage foreclosure help
WASHINGTON -- The Obama administration is throwing a new lifeline to homeowners facing foreclosure who are ineligible for its current aid programs. The enhancements announced Thursday include:
•Foreclosure alternatives. Homeowners unable to qualify for a modification to their mortgage will see a more streamlined process for pursuing short sales and deeds-in-lieu-of-foreclosures, which transfer a home back to the lender. The goal is to help homeowners avoid a foreclosure that could severely lower their credit score.
A short sale is when a home is sold for less than the balance of the mortgage, but lenders consider the debt paid off.
•Protections against falling home prices. New incentives will be offered to help spur loan modifications in areas where home prices have fallen the most and lenders fear that they'll keep falling. The incentives are designed to partly offset investor losses on the mortgages, and encourage loan modifications instead of foreclosures. A total of $10 billion in incentives could be paid to lenders, mortgage servicers and investors to modify loans.
Since the housing rescue plan started in March, the government has extended more than 55,000 loan modifications to qualifying borrowers.
The Obama administration has said it expects to help up to 9 million homeowners.
But the complexity of the program has made for a slow start and foreclosures have risen as moratoriums expired. The number of households facing foreclosure rose 32% in April from April last year, RealtyTrac says.
"It's been slow. The foreclosure problem is not going away," says Mark Zandi at Moody's Economy.com. "But I'm hopeful that there will be more modifications taking off this summer and fall. If not, home prices will slide away."
Some homeowners say they have felt shut out from the Obama plan.
Cara Cea, 38, of Pleasantville, N.Y., has a 7.5% conventional loan, but doesn't qualify for a loan modification under the government's aid rules. Making the payments has been a challenge.
