The US Government Is Trying to Heal the Market Hit by Foreclosures

June 5th, 2009 | Tags: Foreclosure

foreclosure

The US government is trying to heal the market hit by foreclosures by making it easier for people to pay home loans by decreasing the monthly installment. It has opened a small outfit called the Office of Thrift Supervision, which keeps track of defaults on mortgage. This defies common sense. Many people have had their mortgage sum re-worked in their favor anyway.

According to statistics available with MarketWatch, 37 per cent of borrowers fell more than a month behind their payment within 90 days of the revision while 55 per cent defaulted within 180 days. Now the question that arises is if the administration is so keen on helping borrowers will it ever make a difference to the housing market where foreclosures have become so common? In fact, foreclosures have hit a record high in April.

Experts give several reasons as to why the offer is not working out. The most important one is people are just not interested in respecting the mortgage deal when they know that the house where they live has no equity value.

They make the payments only till such time they have found another space to live in. The mortgage modifications have also assumed that those who cannot afford to pay $500 per month will be able to pay $350. But here again the assumption is wrong. People are now interested in savings and real estate is no longer a good place to park cash in. With unemployment on the rise, and many middle class home budgets revolving round two members in full-time jobs, it is not long before the Federal government’s compassionate program turns sour.

The government is keen to resolve the housing crisis which forms the crux of a stable economic growth.

It is common knowledge that consumer confidence had increased because of the appreciation of home values. But today, it is at an all-time low what with many people, even the employed chunk, going broke. Economists are calling this a “negative net worth” which leads to a general feeling of dissatisfaction. The malaise has affected one and all. It is this negative mind set that the government must try to change. Even Americans who have the least possibility of being ousted from their homes do not want to avail of mortgage modification. They would rather not take the government’s aid because one less obligation is more important to them in these trying times. Economic depression has indeed affected the state of mind of most Americans.