Foreclosure prevention is in the forefront of lawmakers’ agenda, with most of them demanding programs that can help homeowners who are at risk of losing their properties.
They are hoping that President-elect Barack Obama’s economic recovery bill and the estimated $700 billion financial aid package, popularly known as Troubled Aid Relief Program (TARP) can bring much needed solutions to the problem of foreclosures.
Obama has indicated that his economic stimulus bill will include investment in infrastructure projects, state assistance for Medicaid payment, reducing middle class taxes and expansion of renewable energy use.
Treasury Secretary Timothy Geithner is already considering plans to overhaul TARP to ensure that its priority would be halting the increase of foreclosed homes.
Meanwhile, Congress has indicated that it will not approve the release of additional TARP funds until a portion of it is appropriated for housing.
On the other hand, House Financial Services Chairman Barney Frank is proposing a measure that would enforce conditions on how the remaining TARP funds would be used. He has called on his colleagues to exert substantial efforts to reduce the number of foreclosure homes and to stabilize the housing market.
According to Frank, his proposal will include the use of up to $50 billion from the TARP money for foreclosure prevention. He has called on the Department of Treasury to enforce a plan to reduce the number of foreclosure properties by April 1, 2009.
The foreclosure prevention plan must be similar to the one proposed by Federal Deposit Insurance Corp. (FIDC) Chairwoman Sheila Blair. Her plan calls for loan modification and a government guarantee that will protect investors in case homeowners defaulted on their loans after they have been modified.
Furthermore, the plan should also cut the costs and reduce write down requirements for borrowers and lenders of the program, Hope for Homeowners. The program offers government support to lenders who agree to reduce mortgage below the appraised value of a property.
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Written by Alex Rolim.
