Bigger Bailout for Unemployed Borrowers

CNBC's Reality Check with Diana Olick:

"We knew it was coming, as it was part of the recently signed financial reform bill, but today the Obama Administration announced it would be sending another $1 billion to unemployed borrowers to help them pay their mortgages."

This really was no surprise all things considering as program after program is unleashed to try to save something that was broken to begin with. This program was suggested all the way back in the October 2009 Congressional Oversight Report on TARP where Bank Representatives said this was needed to help slow down the rate of foreclosures. (Translation, we are overwhelmed and want to be paid as we get flooded.)

From that post that I wrote up in October of 2009:

Terms of the "New Program"

"This new program will complement Treasury’s Hardest Hit Fund [a now $4 billion fund established last February, going to states with above-average unemployment rates] by providing assistance to homeowners in hard hit local areas that may not be included in the hardest hit target states. Those areas are still being determined.

The program will work through a variety of state and non-profit entities and will offer a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months."

As Diana Olick mentions in the CNBC Article:

Blatantly absent from the release today was any information on how borrowers would be required to pay this "bridge loan" back"

Just another Government Program kicking the can down the road?

Well... for Las Vegas Real Estate where over 60% of Las Vegas Homeowners owe more then their home is worth, I really do not see any long term solution here. Perhaps it will work for those that are about even or just a little under the water while they get back on track finding a new job and keep them from getting buried. But Personally, it really does not make too much sense to keep paying an overpriced mortgage for somebody to tack on even more debt when they could easily already be over $200,000 under.

And... since Unemployment is one of the best hardships available to qualify for a Las Vegas Short Sale, I really do not see why somebody would even contemplate participating in this program and being stuck in even mud.

As anybody from the South knows, when you get stuck in a ditch full of mud, you don't floor the gas.

Paul Francis
Prudential Americana Group - REALTORS
Las Vegas Short Sales Agent
702.592.3058