Will the New Loan Modifcation Program Be Enough?

by admin on February 19, 2009

Obama’s new loan modification program is a big step in the right direction. Already people are wondering if this will be enough of a cure to solve the housing woes. Many troubled homeowners who are just barely getting by will indeed get help from this bill and there’s a chance this could help turn around the market.

However, most people are in favor of this new step as it cuts to the core of the problem, homeowners need relief. The money needs to shift from helping large public corporations (which is still necessary in some situations) to helping out Joe the Plumber (sorry bad reference). Average people like you and me are having a hard time with our mortgages and we still want to stay in our house. It’s a desperate feeling gripping many people and emotions are running high, so this new plan for loan modifications is sure to at least provide some measure of assistance when it goes live at the beginning of March.

The problem with the previous programs is that when the loan modifications occurred, the pricincipal amounts were not adjusted enough and consequently the monthly payment burden was unchanged. This is a huge point that seems to have eluded many people and now if monthly payment amounts can get modified, homeowners will have excess cash to spend on essentials, plus some left over for some much needed discretionary spending (it’s called discretionary, but believe me businesses everywhere should call this mandatory discretionary spending).

Decreasing loan balances is something that will get the ball rolling. The plan is voluntary, but there will be a lot of peopel lining up to take advantage of this program when it comes out in a couple weeks. The crux of this is too assist people before they end up in default. If we can keep people in their homes, it will help stem the tide of foreclosures, which in turn will help to stabilize the housing market. Until the housing market finds a bottom, there will be a huge drain on the economy, so really that is job #1 for the current Administration.

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