The foreclosure crisis has gone far beyond those whose mortgages were based on risky subprime loans and other dubious financial instruments. As the economy continues to sputter, and unemployment remains high, unemployment has become the primary reason why people face foreclosure.
Unfortunately, government efforts to help distressed homeowners stay in their homes have not kept pace with this new reality. Programs to assist unemployed homeowners have been poorly conceived and drawn little participation from those in need of assistance.
For example, the Treasury Department started a program last year that in theory allows jobless people to delay their mortgage payments. But the program only allows for a three-month postponement. In practice, though, most people are in between jobs for much longer than that in today's tough economy - nine months, according to the latest data.
Clearly there is a disconnect here between the three-month theory and the nine-month reality. As a result, as of March 31, 2011, the program had fewer than 7400 participants.
Overall, one former Federal Reserve economist, Morris Davis, estimates that up to a million people went into foreclosure because of the lack of an effective response to the impact of unemployment on homeowners.
It's not as if the Treasury Department lacked the funds to do so. Treasury received $46 billion from the troubled assets rescue program to be used toward helping people keep their homes. Yet less than $2 billion has been spent.
If you are facing foreclosure, talk over your options with an experienced real estate lawyer at our firm.
Source: "Homeowner relief misses the mark," Star Tribune, 6-4-11