June 30, 2011 | Filed under Real Estate | Posted by Judy Standifer
The Federal Program’s latest effort to solve the problem of the rising rate of property foreclosures is called the Emergency Homeowners Loan Program. The new program will provide money to the estimated four million homeowners who are delinquent on their loan payments. The best part of this program is that the loan doesn’t have to be repaid in full.
The program is a much-needed move by the government to improve the housing market. EHLP has a budget of $1billion, which will allow loans up to the amount of $50,000 – a particularly helpful thing for homeowners who have lost their jobs. For applicants who meet the requirements, the whole amount need not be repaid. The Department of Housing and Urban Development’s goal for EHLP is that it will serve as a temporary aid for people who are likely to recover from their present economic status.
Advantages Of The Emergency Homeowners Loan Program
The government, specifically HUD, is positive that the EHLP is a program that will ease mortgages or loans in far better terms than banks. The payment goes directly to the lender; there is an assistance period of up to two years, and for each passing year, twenty percent of the loan is forgiven. Five years from the end of the assistance period, homeowners who have decided to stay will no longer have to pay off the loan.
Problems With The Emergency Homeowners Loan Program
Critics like Stuart Gabriel, Director of the Ziman Center for Real Estate at the University of California, have remarked that the new program is a band-aid solution to grim reality. He claims that it will leave people worse than where they are right now, and says that it forces homeowners to risk acquiring more debt than they will get rid of: when borrowers fall behind their payments again, chances are they will have to repay the outstanding balance of the loan when they decide to sell their place or to refinance it. If homeowners decide to sell their houses before the entire loan is considered forgiven, they will still be on the hook to pay the remaining amount. Gabriel believes that for those who are already underwater, all this program will manage to do is put off foreclosure. According to NeighborWorks America, in spite of the fact that each person can receive loans up to $50,000, there is only an available average of $35,000 for each person.
Emergency Homeowners Loan Program Will Not Last Long
Stu Feldstein, president at SMR Research, a housing and mortgage research firm, interprets this as just “a drop in the bucket,” and foresees the program not lasting long. His point of view is that the country’s problems in the housing market will not be boosted by this kind of solution: it may be helpful, but it is not enough. There are an estimated 4 to 4.5 million borrowers who are behind their loan payments, and whose properties are already in the state of imminent foreclosure. The loans that are available can only be given to 30,000 applicants. Analysts confirmed that the primary reason why homeowners are at risk of losing their property is unemployment.
Applications for the EHLP are being accepted as of last week, and will continue to be taken until July 22. Homeowners who have lost their jobs, are at the risk of property foreclosure due to job loss, those who are considered underemployed and those who have economic and medical problems are eligible to apply. The people behind this program are positive about the end result. However, many experts have said that it is too early to gauge its success. So far Federal Assistance has not made a significant impact for the housing market. Last 2009, the Home Affordable Modification Program, which projected to help an estimated 4 million homeowners to lessen loan payments, only assisted 700,000.
In this article, readers learned of the new program that the Department of Housing and Urban Development has offered for homeowners who are already behind the mortgage payments. The program was intended for homeowners who lost their jobs and at risk of foreclosure due to job loss. This can be seen as a smart and necessary move for the government in such a time when the housing market is failing – however, it might be dangerous, too, as it will force people or those eligible applicants to stay in their property for at least five years. This could harm labor mobility, especially for those who live in a place where there is a high rate of unemployment.
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