As we discussed a few weeks ago, the Treasury Department has planned a $1.5 billion assistance program for some of the worst housing markets in the United States.
The program is called the Fund for Hardest Hit Housing Markets, and the aid is directed for homeowners in Arizona, California, Florida, Nevada, and Michigan. The money will be given directly to the state Housing Finance Agencies (HFAs) and they will decide how to use the funds. The program has very broad guidelines and the states have the latitude to determine how the money is disbursed. Some of the possibilities for the use of the funds are mortgage modifications, reduction of second liens or mortgages, mortgage principal reduction for underwater homeowners, and aid for those who are unemployed.
The Treasury Department is looking to the states to come up with innovative measures to help those facing foreclosure. One proposed plan would be to allow underwater homeowners to write off the amount the home is underwater, replacing that amount with a second mortgage that would only be paid off if the house escalated in value. The homeowner and the bank would share the profits, and the homeowner would have an incentive to keep the house.
The $1.5 billion effort has drawn criticism in some quarters. Critics say the amount of money is far too small to create any real change in the housing market. It also pales in comparison to bailouts given to banks and other entities. Some say that the best thing for the housing market would be to allow foreclosures to move forward, because many homeowners simply cannot afford the properties they are in and are likely to default regardless of mortgage relief or modification.
What do you think of the mortgage relief measures taken so far? Are they too little, too late, or is the government on the right track? Join the discussion below.
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