The Obama administration has just announced a new program which is aimed at keeping unemployed homeowners in their own homes.
This new initiative will extend the current allowance of a few months forbearance on mortgages to twelve months. It’s thought that this new scheme could benefit thousands of homeowners, although not everyone will be eligible. This action is necessary as the unemployment rate is still above 9%, and the economy is being slow to recover. Figures for May showed that 6.2 million unemployed had been out of work for at least 27 weeks.
Last Wednesday Obama said that housing has been one of the most difficult problems to solve, and said ''The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected, and so that's continuing to be a drag on the economy. We've had to revamp our housing program several times to try and help people stay in their homes and try to start lifting home values up. We are going back to the drawing board, talking to banks, try to put some pressure on them to work with people who have mortgages to see if we can make further adjustments, modify loans more quickly.''
It was nearly ten years ago that the Federal Housing Administration began offering four months of mortgage relief to unemployed homeowners. The Home Affordable Modification Program has been giving three months relief since last year, with those servicing mortgages under this program being expected to follow the voluntary guidelines.
Anyone applying for one of the newly revised programs must be actively looking for work, and anyone who is able to pay a proportion of their loans is obliged to do so. It's difficult to see a downside of this program as it should avoid further foreclosures by giving borrowers a valuable breathing space to get back on their feet.