The foreclosure rate in the US is rising at alarming rates. Right now, more than 9 million American homeowners are facing looming threats on their homeownership preservation. Fortunately, the government has been working on a solution to help citizens drowning in mortgage debts to survive the situation. In the hopes of putting a cap to the skyrocketing foreclosure rates in the US, the current administration has unveiled the expanded Obama
loan modification program.
The government has instituted expanded features and provisions into the program to help more homeowners in the country. Not only is this expansion expected to halt the foreclosure notices on the rise, many economists and mortgage experts also believe that this might just be the best way to revive the financial and housing markets in the US. Through this revamped
loan modification program, 9 million home loans will have a higher possibility of being modified or if not totally restructured, the mortgage would be refinanced.
On the other hand, this goal might not be as feasible as it looks. There are so many loopholes in the expanded program and although the objective is for the common good of homeowners, the government still has to answer the rising doubts about its effectiveness. Here are some of the loopholes of the program.
1. Longer waiting time and more tedious process
Although the plan has nothing but good intentions to help American homeowners, it might only slow down the already slow process of restructuring mortgages. The waiting time would be longer for each borrower. To top this all of, there would also be a huge increase in the number of borrowers wanting to take advantage of the government's program.
2. Difficulty in getting the cooperation of lenders
When this program was first introduced to lending institutions, many were adamant against the move of the government to use its legislative powers in coercing banks and lenders to modify loans. Now, that the plan has been expanded, the government is expected to push the envelope even more. The administration tried the softer approach in the form of financial incentives. However, considering the number of loans that lenders need to modify and maintain, the incentives might not be enough to cover the financial liabilities that banks and lending institutions might incur. There would surely come a time when lenders would not be financially fit to support this program.
3. More and more loans to be modified
The most disturbing loophole in this equation would probably be ever-burgeoning number of loans to be modified. The government's resources for this could not possibly hold up for the increasing number of mortgages that require refinancing or restructuring.
Obama's mortgage restructuring scheme seems like the ultimate glitch fix to the mortgage crisis. On the other hand, a closer look at the loopholes of the plan would tell you that it would only work in an ideal scenario. Considering the fluctuating economy and the recession, the program seems to be too ambitious even for the US. This would only work if the government has a well-oiled implementation system to ensure that the extended loan modification program would truly deliver its promise to millions of Americans and not make matters even worst.
