Recession made borrowing money even harder
The housing market
Back in February of 2009, President Obama addressed a group of high school students about borrowing money and the housing market. At the time, the market was in crisis and the President decided to fix the foreclosure problem with a program set to turn it all around. Unfortunately, that turnaround never came. One year later, an Economy.com survey shows that only about 750,000 homeowners will have received help since that time. It was projected that between 3 and 4 million would be saved from foreclosure.
Borrowing is the issue
According to Mark Zandi of Economy.com, “The more borrowers who can’t be helped, the more foreclosed properties will be flooding the market. And that means the nation’s housing market, which appeared to recover last summer, could soon take another turn for the worse.”
The predictions for the housing market are not good. Many are looking at signs of how the housing plan by the White House didn’t work as the reason. According to RealtyTrac Inc., a record 2.8 million households were in default last year and that’s up by 20% from the year before. This year they should continue to go up.
Home prices in the mix
Home prices are down by about 30% across the nation, and they are predicted to fall even lower as foreclosures continue to bring neighborhoods’ values down. Zandi added, “It is a very serious threat to the housing market, and still one of the most significant risks to the broader recovery.”
It’s not that Obama doesn’t have time to implement the plan. The goal still is to help homeowners in trouble by modifying their mortgages. So far, by using lowered interest rates and longer repayment periods, the average monthly payment has decreased by $500. The modifications require that homeowners have to make three on-time payments in the temporary modification process, and then they can move to a permanent modification. However, only about 7% of the people who signed up for the program has completed it, according to the Treasury Department.
Who is to blame?
It’s difficult to borrow money these days and homeowners are realizing that modifications are not the sure-fire solutions they were thought to be. So who is to blame for the housing failure? Mortgage companies complain that homeowners are slow, and even hesitant, to get back all necessary paperwork. Housing counselors say that maneuvering the bureaucratic maze of laws and rules is almost impossible. For example, the largest company working through the issue is Bank of America. It has completed less than 2% of the 200,000 borrowers who have applied for the modification program. Rebecca Mairone, bank executive for BOA, said that the bank has started “sending out notaries door-to-door to get signed documents back quickly.”
The final blow to the housing market
Finally, the high unemployment rate is not helping the situation. Unemployment is now at over-10% throughout the nation, and job losses don’t make it easy for people to keep up with payments or qualify for modifications. Cindy Rose of Murietta, California knows this firsthand. She and her husband have seen a huge decline in work and they went to their mortgage company for help. Though they initially got a modification down to $1,700 a month, from $2,650, it only lasted a month. Then they received a confusing letter citing reasons why they were rejected. Rose said, “All these horrible things have happened in the economy and there is nobody there for you.”
The future plan of the administration
When it comes to borrowing money for homes, lenders are still closing doors. The reason is that the market is not yet able to rebound from the recession. Unemployment, along with falling home values, are making things more difficult than anticipated. Only time will tell whether or not 2010 will be the year when the housing market is able to stabilize and turn around.