Turning Foreclosures into Rentals
The plan seeks to stabilize neighborhood home values by turning foreclosed properties into rental units, with the government buying up the properties and then renting them out.
The White House has asked banks to provide up to 12 extra months of home mortgage forbearance (basically “sidelining” mortgage payments) for unemployed homeowners, so they stand a better chance of keeping their homes.
Beef Up HAMP
The plan throws more financial resources into the federal government’s home modification program and foreclosure reduction program. It pretty much guarantees low-cost refinancing, even for homeowners with bad credit (a FICO core of 580 still gets a homeowner a refinancing deal). Homeowners with mortgages less than $729,750 qualify for the program.
The president says the plan is just the right antidote to help homeowners to get back on their feet. “[Our plan] will help millions of responsible homeowners who make their payments on time but find themselves trapped under falling values or wrapped in red tape," the president said.
But will banks and Congress go along? That’s the next step, and it’s unclear whether they will go along with the plan. Some are already saying that it’s time the government gets out of the way and lets the private sector fix the mortgage mess.
"Until the president gives up his crusade to increase the government's interference in the housing market, home foreclosures will continue to rise, our economy will continue to falter and every American's share of the national debt will continue to grow,” says Rep. Scott Garrett (R-N.J.), chairman of the House GSE and Capital Markets subcommittee.
Trouble in the housing sector has acted as a brake on the economy for five years now, but here are a few economic indicators that suggest the recovery might be under way.