How the Obama Foreclosure Plan Is Faring

The Obama foreclosure plan is designed to help increase the number of home loans provided to those who are purchasing a home for the first time, raise the number of approvals for loan modifications, and stimulate the approval of more refinancing applications. The key element of the program is the Helping Families Save Their Homes Act that was approved by the President in May 2009. This particular piece of legislation was intended to add to the potency of the Hope for Homeowners Act that was passed primarily to help borrowers who have mortgages that are underwater.

The Obama foreclosure plan is tasked, first of all, with offering a helping hand to homeowners in getting the consent of bankers and lenders when they ask for a refinancing of their loans to help them avoid foreclosure by lowering their monthly payments. One requirement, however, is that the homeowner should not have a loan balance that is five percent higher than the actual price of his home.

Another part of the President’s initiative is to pay a certain bonus to banks and other lending institutions for each loan modification that they approve and this has the goal of ensuring that monthly mortgage payments do not go over 31 percent of the borrower’s monthly salary. The third component of the Obama foreclosure plan is to offer more new home loans by channeling more funds to the two corporations that own the majority of the mortgage loans.

But the Making Home Affordable Program has had only a slight effect on the housing crisis as of September 2009 and its adversaries were quick to focus on its negative aspects. Meanwhile, the allies of the Obama foreclosure plan point out that it has begun to produce some positive results. Specifically, it is believed that the plan was helpful in reversing the rising tide in foreclosure filings and the continued decline in home market values in several states.

However, the people who do not believe the President’s program have pointed out that only a small number of applications for home loan modifications have been approved by banks even if the homeowners are qualified. Other opponents also observe that the Obama foreclosure plan is not supported by sound economic theories. Nevertheless, the Departments of Housing and Urban Development and the Treasury have proudly released reports that a critical milestone on load modifications had been achieved.

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