According to an article in the Star-Telegram, in addition to the homeowner’s program designed to stop foreclosures , the Obama administration announced that is giving another $200 billion in bail out funds to Fannie Mae and Freddie Mac as part of a plan to reduce foreclosures nationwide.
The article quoted Sheila Bair, Chairman of the Federal Deposit Insurance Company:
“There will still be some borrowers who lose their homes to foreclosure. Some of that will be inevitable. But this should have a significant reduction in the foreclosure rate, bringing it more in line with historical levels.”
I think Mr. Bair is making the understatement of the year. There are going to be a lot of foreclosures despite this foreclosure plan. With the government foreclosure plan the power to modify mortgages is still being left in the hands of the mortgage companies that created the toxic mortgages in the first place. The mortgage companies have already shown that they are often unwilling to modify mortgages in a way that is truly affordable for homeowners, which is why so many homeowners with mortgages voluntarily modified end up in foreclosures anyway. These mortgage modifications must be overseen and regulated to make sure they are fair, affordable and truly stop foreclosure, not just delay it.