Foreclosures On Top Of Obama’s Priority List…
Foreclosure prevention will be at the top of Barack Obama’s priorities. Obama says he also wants to ease taxes on homeowners as he deals with a controversial reform of the mortgage closing process.
The main way to prevent foreclosures is through mortgage modifications. These modifications include rate reductions, reductions (foregiveness) of principal balances and extending the life of the loans to reduce the payments.
Obama said his Treasury and Housing departments would aggressively modify mortgage terms of mortgage terms. He also said feds would work to coordinate mortgage restructurings. Industry execs believe Obama wants government and business to agree upon widely accepted rules to decide who gets a loan modification and who doesn’t. That would differ from the current system, in which loan modification decisions are made case by case.
Mortgage experts say to devise a set of rules for mass modifications will be difficult to do both technically and politically. Automated systems in this area could result in the wrong people getting loan modifications leaving people who need it on the outside looking in. The track record isn’t good for people who do get loan or mortgage modifications. In 2008, more than half were delinquent on their mortgages six months after their modification.
Obama wants lenders to wait 90 days before proceeding with foreclosure if the borrower is negotiating with them. He also wants bankruptcy judges to be able to modify the mortgages but lenders have opposed this.
There are two housing-related tax proposals on the table. One has to do with property taxes and the other is related to income taxes.
Millions of homeowners don’t get tax breaks for paying interest because they don’t itemize deductions. Obama has proposed a 10% tax credit on mortgage interest for those who don’t itemize their deductions. The tax credit would be refundable, which means that filers could get the money even if they don’t owe any income tax.
Next, he proposes giving up to $25 billion to the individual states so they could they would not have to raise property taxes to pay for services such as police and schools.