The Obama administration has returned to the "drawing board," in a second go of trying to curb the foreclosure crisis. After admitting that HAMP, in its present form, has failed to save enough homeowners from foreclosure, the administration is rolling out a program that is designed to help unemployed homeowners avoid foreclosure .
"The biggest driver of foreclosures today remains unemployment," said Housing and Urban Development Secretary Shaun Donovan, who added that he expects the initiative to reach "tens of thousands of families" and to set a standard that the financial industry will follow. The expanded timeframe is necessary, Donovan said, and simply reflects "how long it takes unemployed borrowers to find a job."
The program will provide an interest free loan to unemployed homeowners until they can find work. But should unemployed homeowners really embrace this program? And if so, under what circumstances?
Below are a few questions each homeowner should ask before they sign up for this next foreclosure prevention scheme:
- Is my home worth saving? If a homeowner is severely underwater on their mortgage and the home values in their city are on a long-term downward trend, should they really take out a loan while they are unemployed so they can pay an inflated mortgage? This is a decision every homeowner facing foreclosure and declining home values must make.
- Are my other debts out of control? If a homeowner is facing foreclosure and is unemployed with no other debts than their mortgage, the foreclosure prevention loan program may be a good deal. However, if the same unemployed homeowner facing foreclosure is also facing credit card defaults and delinquent student loan payments, taking out more debt may not be a smart move.
- How long will I be unemployed? The average American is now remaining unemployed for at least a year. And many unemployed homeowners are finding that they will need to retrain because their skills are obsolete. Does that sound like you? If so, you need to consider if you will really be able to repay that foreclosure prevention loan after two years.
(source: WashingtonPost.com )