Federal Housing Administration or FHA is extending the unemployment benefit of allowing homeowners with FHA loans to go from missing from four months to twelve months to keep qualifying homeowners from losing their homes to foreclosure.
This is supposed to help a small group of homeowners who default on FHA loans, which right now is about 3,500 homeowners per month who are unemployed while they try to find a job.
The administration came out to say that expanding this assistance will help the economy and that they hope that other lenders will follow their lead in allowing homeowners to miss up to 12 months of mortgage payments if they are unemployed.
Banking consultants are not hopeful that this program will expand beyond FHA except in certain situations. Their position is if a homeowner does not make their mortgage payments for a year, gets the extended relief for that year, what happens after they default after the 12 months? Who will take the loss?
Community activist groups are saying this is a way to break the link in America between losing your job and losing your home.
This is interesting because out of that 3,500 borrowers per month this could help, only a very small percentage of those people will be helped actually and out of those helped, most will default anyways. That is what the HAMP program is proving.
It is human nature to choose the path of least resistance. People how live in their homes without making house payments get used to using their money for other things besides housing. It is very hard for most people to start paying a mortgage payment after they have been living mortgage and rent free for a year. It also does not create the motivation to get back to work.
This is yet another program from the administration that is not even going to make a drop in the bucket. It will follow down the path of failure as did HAMP and HAFA. They don't get it. Government is not a business and they don't know how to run businesses or programs that actually benefit people. Instead they create more frustration.
Let the chips fall where they may and we would get through this mess much faster. All they are doing is prolonging the inevitable. Reminds me of the bumper sticker I saw the other day: HONK If I'm Paying Your Mortgage.
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