Residents of Nevada, Florida, Arizona, California and Michigan can now unlock their homes from foreclosure with government program.
President Obama announced Friday in a Las Vegas suburb that additional help was coming to those states hardest hit by foreclosures. Arizona, California, Michigan, Florida and Nevada have the five worst foreclosure rates in the U.S. Nevada has one foreclosure for every 95 households, reports www.cnbc.com, which is the worst in the nation. Obama’s foreclosure program allocates $1.5 billion in housing assistance to these states through the “Troubled Asset Relief Program.”
State agencies and then banks and other lending institutions will be the recipients of federal funds in order to help eligible homeowners by reducing their fees. Foreclosure for unemployed homeowners could be avoided with this program, as it is expected to increase the number of loan modifications and at lower rates to assist borrowers who are “underwater” — owing more than their home is worth.
Less foreclosures means fewer bank-owned (or REO) properties on the market to push prices even lower. In Phoenix and other high-foreclosure areas, banks are holding back on putting foreclosed properties on the market for sale so the market won’t get flooded, as a glut of properties for sale causes prices to drop. It’s simple supply and demand. Fewer properties foreclosed on equals less properties on the market leading to higher sales prices, which in turn will boost our sagging economy.
Working with foreclosures in one of the hardest-hit states, I know first-hand how many properties the banks take back through loan modifications that failed to gain bank approval. Many of these borrowers have had their work hours severely cut back or have completely lost their jobs. The current government aid announced by Obama is to help these out-of-work borrowers save their homes.
