President Barack Obama is tackling the foreclosure crisis with a $75 billion Making Homes Affordable Homeowner rescue plan he unveiled Wednesday.
President Barack Obama is tackling the foreclosure crisis with a $75 billion Making Homes Affordable Homeowner rescue plan he unveiled Wednesday. With nearly 9 million households facing possible foreclosure, Bruce Gottschall, executive director of the Neighborhood Housing Services of Chicago, a non-profit housing, counseling and lending organization, praised Obama for working hard to help families save their homes through loan modifications and refinancing. “While there is still a lot of work to do, President Obama’s Homeowner Affordability and Stability Plan shows great promise,” he said. “It doesn’t leave anyone out. At long last, there is a plan that focuses on struggling homeowners who can’t make their monthly mortgage payments, current homeowners who haven’t missed a mortgage payment but may wish to refinance, and those whose homes, unfortunately, cannot be saved.” Gottschall added that the key to fixing the foreclosure mess is to have loan services make good, sustainable loan modifications. “The heart of the current problem is the loan modification process,” he said. “The re-default rate on loan modifications often exceeds 50 percent because the majority of modifications actually increase the monthly payment. It is common sense that if a family cannot afford a $1,200 monthly payment, they won’t be likely to keep their home if their payment goes even higher.” And while there are no quick fixes to the foreclosure crisis, said Michael van Zalingen, director of Homeownership Services, said that as many as 30,000 Chicago area homeowners could keep their homes through the plan. “Currently only as little as 6,000 Chicago land homeowners behind on their mortgage have received a sustainable loan modification. This plan could get us close to reaching all 30,000 homeowners who could be helped,” van Zalingen said. Every homeowner can find something useful in the plan, van Zalingen added. “The government is making it very easy to help those who can be helped in a way that still makes economic sense for struggling homeowners and lender-investors alike,” he said. “At the same time, it doesn’t waste federal dollar on those who can’t be helped.”
If a homeowner’s mortgage payment is current, the plan could lower the interest rate. But if a homeowner is behind on his/her mortgage payment, the plan offers a streamlined payment reduction program. And for homeowners who are upside down—owing more than their house is worth—the plan presents a measure that would allow bankruptcy judges new authority to reduce mortgage debts. For homeowners who must vacate their home, there is new federal assistance available to help people finance their move and find an affordable apartment. Another positive part of the plan is that it gives qualified homeowners a new loan payment based on 31 percent of their gross monthly income. Van Zalingen added that this component would prove to be helpful since so many needy families are spending more than 30 percent of their income toward housing. “Someone making $21,000 a year and paying $942 a month—54 percent of their income—would pay $651 a month under Obama’s plan,” he said. “In essence, your mortgage lender will be dropping your interest rate so that your payment becomes smaller—and more affordable and sustainable.” ______ Copyright 2009 Chicago Defender. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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