The Obama Administration probably meant well… but this is just getting ridiculous.
Remember all the excitement over Obama’s plan to help the unemployed keep their homes?
Well… it turns out, it may not help much… if at all.
You see, when new rules go into effect, unemployment benefits will not count as income for determining whether or not some one qualifies for a reduction in mortgage payment, according to the Charlotte Observer. That means that if you’re unemployed and receive benefits, you’re out of luck with mortgage modifications.
And that’ll end just great… for companies that benefit from foreclosures.
Here’s more from the Charlotte Observer.
Foreclosure program falls short for jobless
By Stella M. Hopkins
So for people with no income other than unemployment, there will be no loan modifications – the chief tool for preventing foreclosures.
“It’s ridiculous how impractical the guidelines … are,” said Al Ripley, an attorney with the N.C. Justice Center. “They truly do not address the needs of unemployed people.”
This program is the centerpiece of the $75billion federal effort launched in February 2009 to stem foreclosures. President Barack Obama has said HAMP – the Home Affordable Modification Program – would help 3million to 4million people avoid foreclosure through 2012.
But only about 170,000 homeowners received long-term modifications in the first year. The small numbers drive criticism that the U.S. Treasury program is flawed, and that lenders do a poor job of implementing it.
To be sure, the HAMP changes will provide short-term help for unemployed homeowners. Lenders and mortgage servicers will be required to give at least three months of lower mortgage payments for people receiving unemployment benefits. The temporary reduction could last as long as six months.
Afterward, homeowners will be considered for a long-term modification with reduced payments. But, at that point, unemployment benefits will no longer count as income for determining whether they can qualify for a modification. The changes are expected to take effect over the next several months.
“Any programs that give people breathing space while they’re out looking for work … are a positive thing,” said Mark Pearce, the top N.C. mortgage regulator and a leader in national foreclosure-prevention efforts. However, he said, “This program doesn’t address the folks that are unemployed for a longer period of time.”
The changes come as unemployment rates remain stubbornly high, posing big challenges for efforts to slow foreclosures. More than 6.3million people nationwide have been unemployed longer than six months – five times pre-recession levels.
The changes are “not enough to get significant numbers of people to the permanent solution we’re all looking for,” said Rich Lee, foreclosure prevention team leader for the N.C. Housing Finance Agency. “Think of it as a Band-Aid until you can do more to stop the bleeding.”
So how do you profit from the potential for even more foreclosures? You buy the very companies that help process them. Here’s more on that.
And while we’d like to tell you that foreclosure fears are waning, they’re not. There’s still plenty to be concerned about, especially with Option ARM resets.