Obama aid package to help with home foreclosures
The $1.5 billion federal aid package will be distributed to housing agencies in California, Nevada, Florida, Michigan, and Arizona – the states hardest hit by the housing crisis – to help keep struggling homeowners in their houses.
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Some experts, however, say that once the $1.5 billion is divided up among the five states it may amount to merely to a Band Aid on the foreclosure problem.
“It’s just not a lot of money in the context of what we’re talking about here,” says Richard Green, director of the University of Southern California Lusk Center for Real Estate. Especially, he says, “in a place like Nevada, where an astonishing number of homeowners are underwater on their mortgages.”
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Many real estate experts have been saying that in order to forge a path out of the housing crash, lenders need to lower the principal owed by homeowners who hold mortgages for more than their home's worth.
“Some homes are never going to be worth the mortgage balances,” says Professor Green.
Diana Farrell, deputy director of the National Economic Council, said Friday that the initiative is “one of many tools” the government is using to improve the housing market.
Home prices have begun to stabilize
“We are in a dramatically different place” than a year ago, said Ms. Farrell in a press conference, as home prices in many parts of the country are stabilizing and foreclosures slowing.
“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007,” said Jay Brinkmann, chief economist with the Mortgage Bankers Association, in a statement.
Still, according to the group, 15 percent of all home loans are in foreclosure or a single payment overdue.
Green, who recently spoke to a group of real estate professionals in Fresno, Calif., a city with a foreclosure rate that ranked among the highest in the country, says some degree of optimism is returning to the market.
“There’s a cautious optimism. Maybe a greater emphasis on the caution rather than optimism,” he says. Nationally, he says, “we are more or less back in balance. Prices aren’t falling anymore. They aren’t going up a lot, but prices aren’t falling. I think we’re much closer to normalcy.”
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