Posts Tagged ‘foreclosure’


Obama Administration’s Efforts to Prevent Foreclosure

Posted by Sara M. Varese

On Friday, March 26, 2010 The Obama Administration announced ways to stop foreclosure by:Foreclosure Prevention Pig Mascot

  • Legislation requiring lenders to temporarily decrease or eliminate mortgage payments for those who are unemployed or having trouble making payments to no more than 31% of their income. The previous attempts by the administration to help underwater homeowners, which make up 25% of all homeowners, have had little success due to the prior program’s lack of ability to help those who were unemployed.  Therefore, the new program hopes to buy these homeowners some time to find a new job and get back on their feet so that they can soon afford to make regular mortgage payments.
  • Offering lenders financial incentive to reduce mortgage balances for underwater borrowers who have loans exceeding 15% of their house value or refinancing current borrowers into more affordable interest rates.  The reduced mortgage amount will be put into an interest-free account and gradually forgiven over 3 years if the homeowner is current on payments. Until now, officials have tried to steer clear of mortgage reduction because they believed that would encourage people to default on their mortgage, especially if they were able to make them.  However, because previous efforts to prevent a housing slump and increasing foreclosures have proved not to be effective, government and lenders such as Bank of America are realizing that mortgage reduction seems the only way to go.
  • Offering lenders incentive to find alternative ways to prevent foreclosure if mortgage reduction and interest rate refinancing are not an option through methods such as short sales, which is permitting the house to be sold for less than the mortgage balance.

The assistance will be funded by shared costs between private banks and the federal government, the latter to be funded through the $50 billion TARP (Troubled asset relief program), which will not require additional tax dollar support.

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Strategic Mortgage Defaults Study Statistics

Posted by Sara M. Varese

According to a study by the Financial Trust Index, the likelihood of a homeowner walking away from their home and mortgage when they can still afford it, increases when the loan amount is significantly more than the home value or if many neighbors are walking away.    In addition, the study found the following:

-          If a homeowner could still afford the mortgage, that no one in the study would default if the equity shortfall is less than 10% of the value of the house. However, 17% of the homeowners would default if the equity shortfall reaches 50% of the value of the house.

-          Eighty percent of the study participants found strategic mortgages morally wrong.

-          Homeowners who had purchased their homes 5 or more years ago were 80% less likely to consider a default strategically than more recent purchasers.

-          Although they may think it is wrong, homeowners are more likely to admit to default when the surrounding area is known to do so.

-          Defaults are considered less morally wrong in the Northeast and the West.

In addition, the following are foreclosure facts that consumers should be aware of:

-          Foreclosures lowers credit scores by at least 100 points.

-          Foreclosures stays on credit reports for 7 years.

-          A foreclosure on a credit report makes it very difficult to obtain a personal or car loan.

This study statistic summary was provided by, a company specializing in providing immediate cash assistance for consumer immediate financial needs.

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