Reading Time: 3 minutes
On January 4, 2010 the Illinois Family Institute posted an exclusive report titled: Obama Administration’s “Homeowner Affordability and Stability Plan” Actually Putting Homeowners In Default or Foreclosure. The story detailed how a central Illinois family was told they were eligible for a program which was designed to give financial relief to homeowners in the state, many of whom were either in default or going through the process of foreclosure. However, the Illinois Family Institute (IFI) report revealed some families–who were informed by their mortgage lenders that they were eligible for the Homeowner Affordability and Stability Plan even though they were not in arrears on their monthly payments to their lenders– were instructed months later they did not qualify for this program.
An estimated one in five mortgage holders in America have lost their homes to foreclosure. The mortgage relief plan was originally created to head off more foreclosures in Illinois and across the nation. The IFI exclusive report revealed that possibly hundreds, if not thousands, of Illinois homeowners–whose mortgages were not in default or foreclosure–were later to learn the program actually put them in danger of losing their homes.
The IFI story brought this issue to national attention. IFI has since learned the Homeowner Affordability and Stability Plan has expanded the program to possibly include some of those who were deemed ineligible–after months of paying agreed-to lower mortgage payments, due to a decrease in their interest rates.
“It’s unbelievably sad how many people are losing their homes,” said a licensed Illinois real estate appraiser who spoke to IFI on the condition he remain anonymous. “Many banks are actually taking ownership of properties obtained because of foreclosures. This is a departure from the past. When banks take ownership of homes due to foreclosures this shows up as a liability on their ledger sheets, instead of an asset. This is inconsistent with how lending institutions used to operate, and many experts in the field are confounded by these latest developments.”
On Friday, February 26th, 2010 the U.S. Senate failed to extend unemployment benefits for an estimated 1.1 million Americans whose benefit period will soon expire. But Congress is expected to complete negotiations regarding another extension of benefits for the over 1 million who will soon fall off the unemployment roles. However, this extension would only be for a short period of time.
There are over 750,000 homeowners nationwide now participating in the Homeowner Affordability and Stability Plan, many whose only income derives from unemployment benefits. Some recipients have been on the unemployment roles for nearly two years. In the past, recipients were eligible to receive unemployment checks for six months–with a three month extension when unemployment rates were over 6%. In recent years, the federal government has subsidized added weeks of unemployment eligibility beyond 39 weeks.
Currently, the national unemployment rate is at nearly 10%. This figure does not include those who have exhausted their unemployment benefits, those who have taken part-time jobs and others who have stopped looking for work entirely. Unemployment benefits were never meant to be paid out on a permanent basis, as is the case with Social Security retirees and the handicapped.
When unemployment benefits eventually run out, many of those currently enrolled in the Homeowner Affordability and Stability Plan will be unable to meet their adjusted mortgage payments and the rate of foreclosures will go up dramatically. Most agree, despite a possible recovery of the economy, a significant number of jobs lost will never return, due to the fact that companies have moved out of the country in search of cheaper labor.
There have been plans floated by the Obama administration and some members of Congress to put a moratorium in place on mortgage foreclosures. However, such legislation is not yet pending. Some financial experts see an even larger problem on the horizon regarding foreclosures on commercial properties which would have a devastating impact on the economy.