Will the $700B Bailout Really Help Homeowners Facing Foreclosure?
When some of the biggest investment firms declared bankruptcy last month, it resulted into widespread panic in the entire financial industry. In order to prevent the nation from falling into a recession, the government immediately came up with a bailout program, worth about $700 billion. But despite the huge budget allocation, many homeowners at risk of losing their homes to foreclosure are wondering if the supposed benefits of the multi-billion bailout program will reach them.
For most of these troubled borrowers, such possibility is very little. This is considering that the bailout plan is meant to stabilize the economy and allow banks to have enough money to lend. The problem is that many of these lenders have become more cautious when it comes to approving loans including mortgages, car loans and even credit card applications.
To make matters more difficult for these struggling homeowners, the inventory of new and existing homes for sale in the market has continued to grow and has even caused home prices to decline considerably, especially in areas hit hardest by the subprime mortgage mess. With such market conditions, selling their homes is out of the question.
Both consumer and housing advocates are not pleased with the decision of the government to bailout these large corporations instead of using the money to help distressed homeowners. For them, these giant investment firms were the ones who funded the hybrid and subprime loans, which were considered to be the culprit for the current foreclosure crisis.
Although the government has already approved a $300 billion housing rescue program, the current mess in the financial industry will surely result to more homeowners facing foreclosure. As it is, the money allocated for the said mortgage relief program is considered to be insufficient.
According to Deutsche Bank, it can be expected that about 20 million American borrowers will have an “upside down” mortgage after about 12 to 18 months. Most of them will be from California, Nevada and Florida.