HAMP, HARP,HELP and now HOME
October 16, 2011
The government has enacted a series of foreclosure-avoidance programs, but with seemingly little success. The rules and regulations have made it very difficult for upside down homeowners to qualify for either a loan modification or a loan refinance. Most of these upside down homeowners have no equity because the decline in value has taken equity away. If a refinance program requires that the borrower have equity in the property, it obviously will not work.
In the Los Angeles Times on Sunday, October 16, a headline caught my attention "Bill would end penalty to tap 401(k) to avoid foreclosure." Co-written by a Senator and a Representative, the bill would allow owners to pull out up to $50,000. The money could be used in a lump sum to pay down the delinquent mortgage balance or to fill shortfalls caused by a reduction of household income. Titled the HOME act, short for Hardship Outlays to protect Mortgage Equity Act, the plan proposes to eliminate the 10% penalty charged when there is an early withdrawal of funds from a 401(k).
In retrospect, it may be too bad that the government didn't use the TARP (Troubled Asset Relief Program) to have banks paid only the amount used to actually reduce the outstanding balance of a loan or the interest rate. Homeowners might have then made payments and thereby stem the flood of foreclosures. Banks would not have been allowed to use government funds to enrich themselves.
It does seem that we are entranced by acronyms rather than a program that could adjust to the reality of this housing recession.
The government has enacted a series of foreclosure-avoidance programs, but with seemingly little success. The rules and regulations have made it very difficult for upside down homeowners to qualify for either a loan modification or a loan refinance. Most of these upside down homeowners have no equity because the decline in value has taken equity away. If a refinance program requires that the borrower have equity in the property, it obviously will not work.
In the Los Angeles Times on Sunday, October 16, a headline caught my attention "Bill would end penalty to tap 401(k) to avoid foreclosure." Co-written by a Senator and a Representative, the bill would allow owners to pull out up to $50,000. The money could be used in a lump sum to pay down the delinquent mortgage balance or to fill shortfalls caused by a reduction of household income. Titled the HOME act, short for Hardship Outlays to protect Mortgage Equity Act, the plan proposes to eliminate the 10% penalty charged when there is an early withdrawal of funds from a 401(k).
In retrospect, it may be too bad that the government didn't use the TARP (Troubled Asset Relief Program) to have banks paid only the amount used to actually reduce the outstanding balance of a loan or the interest rate. Homeowners might have then made payments and thereby stem the flood of foreclosures. Banks would not have been allowed to use government funds to enrich themselves.
It does seem that we are entranced by acronyms rather than a program that could adjust to the reality of this housing recession.
posted by shirley harry at 8:19 AM
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