Well we told you we would show you the plans of whoever was elected in laymens terms. this is part I of our look at the policies of our new President Elect Barack Obama.
The Center for Responsible Lending estimated in August that nearly 2.2 million foreclosures would occur due to defaults on subprime loans from late 2008 through the end of 2009. More than 40 million homes in neighborhoods surrounding those foreclosures would suffer price declines as a result, causing a $352 billion total decline in property values, or an average $8,667 per home.
All those extra homes on the market drives prices down which cripples lenders assets on the books and further aggrivates our economic woes.
Hope for Homeowners (H4H). This plan went into effect in October 2007 and it aims to allow a new lender to issue a government backed mortgage at 90% of the current appriased value. The old lender will have to write off the difference. This may be acceptable to them since they would loose even more if they had to foreclose.
Foreclosure Mortatorium - Obama has called for a few month stop on all foreclosures. During this time banks will be forced to look at homeowners that are attempting to make payments in good faith but need a modificaiton to the loan to help them keep the house.
Bankruptcy reform - Obama has called for bankruptcy reform that would allow a judge to modify a loan if a lender refuses to do so.
Regulations such as:
- Crackdown on mortgage fraud - crack down on mortgage fraud, create new criminal penalties for mortgage professionals guilty of fraud and require "industry insiders" to report suspicious activity
- Better loan disclosure - provide potential borrowers with a "Homeowner Obligation Made Explicit," or HOME, score which would give them an easier, standardized way to compare mortgage products and compare the full costs of the loans.
- Universal mortgage credit - His proposed 10% universal mortgage credit for homeowners who don't itemize their taxes could provide an average of $500 to 10 million homeowners, most of whom earn less than $50,000 per year
- Improve housing affordability. Obama has proposed creating an Affordable Housing Trust Fund to create "thousands" of new affordable housing units annually
- Build sustainable communities.
We hope this helps understand the stated goals of our new President. What is clear is that this is going to be his top priority when he gets into office. The above mentioned changes along with an aggressive stimulus package is expected early next year.
As always we'll keep you in the loop. Look for part II of his financial policies coming soon...