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Week of 2.6.09

Help for Struggling Homeowners

home with money Help for Struggling Homeowners

While federal money seems to be flowing freely to shore up banks, homeowners are left to wonder: "Who's looking out for us?" Members of Congress and President Obama are wrangling over to what extent the huge stimulus bill will fund help for people struggling with the devastated housing market and foreclosure, according to a new report in The New York Times.

Republicans seek to aim money directly at home buyers, with new tax breaks and up to $300 billion in mortgage subsidies to attract new buyers.

Meanwhile, Democrats are focusing spending on those who are in the greatest distress. They propose at least $50 billion on federal programs to reduce the number of mortgage foreclosures.

On Wednesday, the Senate voted to expand the economic stimulus plan with a tax credit of up to $15,000 for homebuyers, a move initially proposed by Republican lawmakers. Currently, first time homebuyers receive a tax credit of $7,500.

One of the legislative efforts provoking the most fear in the mortgage banking industry and delight among consumer advocates is called "cramdown". This would change the law to make it easier for judges to alter the terms of mortgages, making them easier for many struggling homeowners to pay.

The Obama Administration is working on its own plan -- to be revealed on Monday -- to spend up to $100 billion to prevent home foreclosures, according to a report by Reuters. The administration is considering government guarantees for home loans as a way to stem the rate of foreclosures. The proposal to guarantee modified mortgages is a variation of an idea backed by the Federal Deposit Insurance Corporation (FDIC).

Some 1.5 million foreclosures might be prevented this year in a program that would pay servicers $1,000 to modify troubled loans by reducing the interest rate, forgiving a portion of the principal, or extending the repayment plan, according to FDIC Chairman Sheila Bair

About 2.2 million homes went into foreclosure in 2008, according to data from the Mortgage Bankers Association, and home prices have fallen 25 percent since the pinnacle of the housing bubble in 2006. Analysts are forecasting that the number of homes in foreclosure could reach four million in 2009.

For more:

Associated Press: Obama: Catastrophe coming if Congress doesn't act

Associated Press: Sheila Bair: From children's book author to the world's second-most-powerful woman

The Atlanta Journal-Constitution: Isakson proposal passes Senate: $15,000 credit for homebuyers}}

Bloomberg: {{Obama Foreclosure-Relief Plan May Guarantee Rewritten Loans

Bloomberg: {{Lawmakers Seek to Revise Stimulus; Bill Now in Senate}}[[]]

CNN: GOP senators draft stimulus alternative

The New York Times: Both Parties Move to Aid Homeowners

Help for the Homeowners?

Coping with the Mortgage Mess

Help for Struggling Homeowners

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