D.C. Programs to Stem the Tide of Repossession Properties

Washington D.C. policymakers are planning to launch a new set of government programs to abate the anticipated tide of repossession properties due to the rising unemployment. The programs may include providing emergency loans to jobless homeowners to help them remain in their properties.

Department of Housing and Urban Development’s mortgage finance senior adviser William Apgar explained that the initial programs of the government to contain the number of repossession properties were not designed to target foreclosures due to unemployment.

Meanwhile, economist Doug Less said that the program of the government to help distressed homeowners restructure their loans was a failure.

Last month, the unemployment rate rose by 9.5 percent, the highest ever in 26 years. Because of this, some analysts are expecting that foreclosure homes would reach 3 million this year.

Among the proposals to help distressed homeowners include providing federal money to help with paying mortgages. Representative Barney Frank has proposed a law that would allocate $2 billion in federal funds for short term loans to borrowers who are jobless and cannot qualify for housing assistance.

A proposal was also made to temporarily reduce monthly mortgage payments by limiting them to interest rate due on a loan, thereby eliminating the need to pay the outstanding principal for several years. Furthermore, a proposal was also made to increase payments under the Troubled Asset Relief Program (TARP) to eliminate second mortgages on houses created by lines of equity credits.

Lawmakers are also considering allowing distressed homeowners to lease their homes if banks repossessed them. Under a proposed House bill, former homeowners of repossession properties would be given an option to lease them for five years. The proposal was made to prevent foreclosure properties from deteriorating and further ruining the housing market which is now suffering from declining home values.

The proposal is also expected to give lending institutions a better chance of recovering their principal by selling the distressed properties once the real estate market has stabilized. Another consideration is to strengthen government guarantees for banking institutions and investors to help them avoid incurring more losses from loans they have modified.

The Obama Administration pledged almost $10 billion to insure mortgage servicers from future losses in the event that homeowners will face again the possibility of turning their homes into repossession properties.

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• More Proposals to Contain Foreclosed for Sale Properties