Foreclosures: The Impact Of White House Plans On Foreclosures

The Bush administration in discussion with mortgage bankers has come out with plans to freeze rates for five years. But how much that will effectively check the trend is being debated. Not many will qualify for the freeze. Many including the bankers are skeptical. Indiana bankers are doubtful if these steps alone are strong enough to stop the rolling foreclosure chariot. But perhaps the slowing down will give lenders and the government a breather to work out a long-term solution. The five-year freeze will be applicable on certain types of loans.

Bush announced that 1.2 million borrowers would be able to benefit from the freezing plans but they would have to come forward. Associated Press said that the plans would help only a fraction. Bush went on to add that house owners would be able to refinance and move on to loans from FHA. The latter will specifically help those struggling with sub-prime foreclosures.

The lending boom had led to a housing boom. The key player in this drama was the role of the sub-prime mortgage loans. These were foisted on risky borrowers. But thousands began to fall behind in payments since last summer when interests rose. This led to innumerable foreclosures. Indiana ranks third in the dubious race and is closely trailing Michigan Foreclosures and Ohio Foreclosures. Here in Indiana most of most the loans in delinquency were in the sub-prime group.

In California about 12% of the sub-prime borrowers would qualify is the finding of ACORN.

In Indiana the scheme will not help many because most of the loans were taken by real estate investors and speculators and not by people actually residing in the units. Thus the plan will not be of much benefit to the metropolis. Avery, a group trying to rein in mortgage fraud, says that 45% of the loans were pocketed by investors. Many were highly publicized fraud operations that shook the city. Investors were hand in glove with property valuers to unjustifiable inflate value of properties. Avery says that all that will be done is to delay matters until the next year presidential elections. Nevertheless something is better than nothing.

Democrat Bardon targets the idea of getting loans at the traditional rates. To make it operable he suggests that money could be raised by selling state bonds to fund the fees required for the loan transfer procedures.

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