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Last year, the number of loans in foreclosure hit a new record of 2.3 million, which is more than double the volume in 2006. Industry analysts estimate that it will hit at least 3 million in 2009 in the absence of a government rescue. Furthermore, according to the Mortgage Bankers Association, by the end of 2008, slightly more than 9 percent of all mortgages in the United States were either delinquent or in foreclosure.
According to the current White House administration, President Obama’s strategy to decrease the overflow of foreclosures will include a combination of government inducements and new pressure on lenders to cut monthly payments from borrowers at risk losing their houses.
This strategy is expected to include government subsidies for reducing a borrower’s interest rate, which a lender would have to match with its own money. The plan to subsidize lower interest rates for distressed homeowners would involve the government and the lender each contributing matching amounts to reduce a person’s monthly payment, possibly by several hundred dollars a month.
BuckNakedPolitics writes: "I have little sympathy in one sense with the moans of homeowners stuck with negative equity as a result of a gamble that the value of homes would always go up, up, up. One reason I'm living in an apartment is that I recognized that this myth was a myth."
Conservative blogger Michelle Malkin describes it as a new "massive mortgage entitlement campaign।"
BOTTOM LINE:
This bailout has created a shortage of foreclosures due to the fact that banks have frozen the foreclosures on most occupied properties. In return, this shortage created a reduced supply of new REO listings.
This is only temporary however, because lenders will soon have to foreclose on all the occupied homes that, even with this freeze, never could have caught up on their payments anyway.
Responsible taxpayers are understandably frustrated in having to bail out irresponsible spenders.
Any drop in supply will create temporary stability in housing prices that will not last.
Posted by: Tanya Milin
