As many are aware the Obama administration has rolled out many programs to reduce foreclosures or to keep people in their homes, at least for a bit longer.
There have been first-time homebuyer programs, which seem to keep getting extended, programs with acronyms such as Home Affordable Modification Program (HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), Second Lien Modification Program (2MP), and Home Affordable Refinance Program (HARP). Most are alternatives to short sale, foreclosure or bankruptcy or in the case of HAFA an adjunct to short sale, deeds-in-lieu or foreclosure.
These programs have not lived up to the hype and promises of the Obama administration.
HUD Secretary Shaun Donvan has stated that the Obama administration will announce some new programs in the next few weeks.
One is reported to be an up to $50,000 no interest loan to the unemployed so they can pay their mortgages and living expenses for two years. Sounds great though imagine that many of the people will have mortgages that are much higher than the homes value, they lose their job, get a large no interest loan from the government, then are so underwater they default. Suddenly the taxpayer is on the hook for all this money.
The second program will be a government refinancing program. We have not heard the particulars of this program so we cannot comment on it yet.
The third is a possibility that the First-Time Homebuyer Tax Credit might make a return. HUD Secretary Shaun Donovan has said that it is too early to tell if the program will be revived but is being considered. Unfortunately, when officials hint the tax credit could be revived it just invites buyers to put off a purchase today in case the tax credit comes back in the coming months.
Our Florida Governor, Charlie Crist has said this is just what we need to fight foreclosures and to revive the economy. Of course the past first-time homebuyer tax credits did spike sales of homes with prices up to $200K – $250K, but according to surveys 70% of the people were going to buy anyway and just sped up their purchase. Take away the tax credit and sales plummet. So how much benefit does the economy get from the tax credit? Not bad short-term, but longer-term there is little to no benefit and buyers become used to getting free money for buying, which of course could make it necessary to continue these indefinitely.
Of course all taxpayers are going to have to pay the money back with interest at some future date, and that it will be a great burden on future generations.
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