Re-Default in Obama�s $75Billion Program for Foreclosures



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By : John Cutts



President Barack Obama�s $75 billion program to stop further foreclosures will again just waste government money and bank money because it will just extend the number of months underwater borrowers occupy bank properties for free.



Just like any other program launched under the previous administration to prevent foreclosures, Obama�s program did not spend more effort in distinguishing between borrowers who have great chances of sustaining their mortgage payments after loan modifications and those who will just go through the restructurings just to extend their free stay in the properties.



Under Obama�s program to mitigate foreclosures, the chances of re-default are great because of two issues. The first issue is that the program did not consider the possible thinking processes of underwater borrowers. With their mortgages deeply underwater, borrowers have little motivation to spend some more effort to save their homes. They know that even if the monthly payments are reduced to levels that they can afford, their mortgages would still be underwater. They would just go through the motions of modifications but would not sustain their payments to avoid foreclosures.



The second issue is that Obama�s program does not have the provisions to screen out applicants who have major financial problems other than their mortgage loans. Surely many applicants would be accepted into the program even with big credit card debts, reduced incomes because of the downturn and doubtful capability to pay even if the monthly payments are reduced because of possible job losses.



The second issue is that Obama�s program does not have the provisions to screen out applicants who have major financial problems other than their mortgage loans. Surely many applicants would be accepted into the program even with big credit card debts, reduced incomes because of the downturn and doubtful capability to pay even if the monthly payments are reduced because of possible job losses.



One option is for Obama�s administration to add more stringent screening processes to weed out the really irresponsible borrowers. But then again, this needs additional funds and will again provoke an outcry from homeowners troubled by foreclosures and groups advocating for the rescue of foreclosure-burdened Americans.



Are there other options to mitigate foreclosures? Perhaps these options might work: giving tax breaks to anyone across the country who buys a foreclosed property, erasing current default records to give a clear break to everyone and allowing banks to proceed with foreclosures to reduce losses.







