In another sign of the times (crazy as they may be) on April 5, 2010, in an effort to end the foreclosure crisis, the Obama administration will start paying troubled homeowners to “Shortsale” their home. This latest program, which is still being fine tuned, will allow owners to sell for less than they owe and will give them a little cash to speed them on their way. Reports show more than five million households are behind on their mortgages and risk foreclosure. Only a small percentage of homeowners have been helped by the government’s $75 billion mortgage modification plan. The administrations biggest concern (as it should be) is that millions of foreclosures could delay or even reverse the economy’s tentative recovery. I think if you look at history, there is little doubt getting our country back on track will come.
The plan calls for the servicing bank and second position (if there is one) to get $1,000. And now the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.” through the housing industry. Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure. For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.
Whether this plan works or not time will tell. I guess it’s good the administration is going to give the money directly to the people instead of lining the pockets of their cronies at the banks who give huge amounts of monies to both parties election campaigns.