Current Programs Aren’t Working

Kristiane Chappell

Kristiane Chappell is trying to save her disabled mother’s home in California from foreclosure.

The federal programs currently in place to help struggling homeowners will continue to have minimal effect on the foreclosure crisis unless significant changes are made.

Three changes that would help those of us facing foreclosure.

For starters, principle reduction for underwater mortgages or qualifying hardships, like permanent disability or the death of a spouse, would help many people nationwide stay in their homes. The Federal Housing Administration (F.H.A.) requires lenders to provide matching funds to utilize the current version of that program. As a result few lenders participate. If matching funds were no longer a requirement, qualified borrowers could take advantage of that program.

Second, the Home Affordable Modification Program (HAMP) and F.H.A. guidelines should be changed to allow greater flexibility in what lenders can do to keep a person in their home. Currently, only a certain percentage of a loan can be deferred under HAMP guidelines. The equation does not take into account that thousands of loans are underwater. If the house is worth less than the original loan, F.H.A guidelines should allow a higher percentage to be deferred.

Finally, foreclosure blight lowers property values of entire neighborhoods. Banks should rent out houses that remain vacant for more three months. Renters, like home owners, bring revenue into to their local communities. This will prevent homes from falling into disrepair due to extended vacancy. Homeowners that are foreclosed on could be given the option of renting back the property at a fair market rate. Families would be saved the stress and expense of moving. And banks would continue to receive monthly payments.

Topics: Economy, housing, mortgages

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