There has been renewed interest in the Treasury and in Congress to offer help for troubled home owners since the President’s State of the Union Address last year. There are an estimated 11 million homeowners who are underwater on their homes and fewer than two million of those borrowers took advantage of the Home Affordable Refinancing Program, or HARP, since it was introduced in 2009. Earlier this month, both Congress and the US Treasury have taken action to advance those plans that have been discussed in recent years.
Congressman Merkley’s Plan
One member of Congress – Jeff Merkley (D-Oregon) – is working on introducing a bill that would either guarantee or purchase refinanced mortgages through a federal trust. Merkley outlined the bill last year and in his proposal, the federal trust that would get set up would give financial relief to mortgage borrowers who had privately held loans. The trust would also be set up with a committee from one of the housing agencies in Congress to oversee where the money gets spent.
Congressmen Merkley’s plan would require that homeowners be current on their payments in order to qualify and hence offers help for nearly one million borrows who would qualify under the guidelines.
US Treasury’s Plan
In addition to Merkley’s plan, the US Treasury Department is also working on a program that would start in Oregon to see how it works. This program would purchase mortgages from private securities by using federal housing money. The interest rates would then be modified which would help borrowers lower their payments and overall principle balance. If the program is implemented and it works in Oregon, it could be used as a model for other states in the country.
Another potential plan for helping troubled homeowners would use more than $7 billion of US Treasury funds. These funds would be used to help homeowners avoid foreclosure in some of the states that have been hardest hit by the housing crisis. Dubbed the Hardest Hit Fund, the money that would be used for this program would come from the Troubled Asset Relief Program, or TARP. It would help homeowners in 18 states eventually, but that is only if it works effectively in Oregon, where the pilot program will be installed.
If the TARP plan is implemented in Oregon, it will begin in one county and it will start with 50 mortgage borrowers at first. Money from the TARP fund have already been tapped by the 18 hardest hit states, but it has been fairly slow in getting the word out about the money. Less than $2 billion has been used of the fund so far. The goal, however, is to disburse all of the money by 2017, when the program actually expires.
These are the some of the major plans being discussed and proposed in Congress and throughout the upper echelons of the government. Which one do you think would work the best?
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