Just replace "bank failure" with "declining equity".
“Cessation of work is not accompanied by cessation of expenses”
-Cato the Elder
Information continues to trickle out about a new program designed to help the unemployed keep their homes. The Home Affordable Unemployment Program (HAUP) is a new program from the federal government (the same people that brought you HAMP!).
We are still awaiting word on exactly how the funds will be disbursed, but the HUD program will start by October 1st. At least $1 billion is in the legislation for redeveloping distressed property. Another of the main thrusts of the program is to allow unemployed homeowners who are current on their mortgage to get a forbearance for at least three months. During the forbearance, monthly mortgage payments would be reduced or eliminated entirely.
The plan is based on a similar Pennsylvania program that effectively does the same thing. The program has been going strong since 1983, so it may prove to be viable on a larger scale.
Loss of income due to unemployment is (unsurprisingly) the chief reason for foreclosures. Unemployment continues to run close to 10%, and broader measures of unemployment are running close to 17%, so barring an unforseen turnaround, the foreclosure problem will likely be with us for some time.
Thus far, other government programs meant to reduce foreclosures have met with limited success. The Home Affordable Modification Program (HAMP) has had more borrowers withdraw from it than have had their mortgages modified by it, and re-default rates are very high. Again, this is unsurprising as those that have been out of work long term and don’t have much money are unlikely to be able pay even a modified mortgage.
Many who could save money by refinancing into all-time low mortgage rates have been unable to do so, either because of credit reasons or because their home lost value and they do not have enough equity to qualify for refinancing.
I will post more as more details about the program emerge.
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