According to an article in the Dallas Morning News, President Obama’s $75 billion Homeowner Stability Initiative is expected to save 9 million American homeowners from foreclosure .
The article said:
Headlining Obama’s plan was a $75 billion Homeowner Stability Initiative, which would provide a set of incentives to lenders to cut monthly mortgage payments to sustainable levels. It defines this at no more than 31 percent of a homeowners income. Funding would come from the $700 billion financial industry bailout passed by Congress last fall.
Another key component: a new program aimed at helping homeowners said to be “under water” – with dwellings whose value have sunk below the principal still owing on their mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 to 5 million families do just that.
I think it is an excellent decision to give mortgage lenders an incentive to cut mortgage payments; but are there also consequences if they chose to do nothing, like many currently are doing? Also, these past months have proven to us that mortgage companies are ineffective in modifying mortgages in a way that actually reduces the number of foreclosures. Haven’t we been down this road before? Will this plan really reduce the number of foreclosures? If we use mortgage companies’ past performance as measure of probable success, the answer is probably…no.