Foreclosure Relief Gives Hope to the Home Building Industry
A foreclosure trend was uncovered and presented that Arizona, California, Florida, Georgia and Nevada, the top states with most house buildings were the hardest hit by foreclosures. With that, hopes are high that the $275 billion foreclosure relief project by the Obama administration help in steadying home prices and help new home constructions to reboot.
Even with 35 to 40 percent home value depreciation, these five states still accounted for 25 percent of new house constructions.
A $15,000 tax credit plan was proposed to the Senate that also wishes to increase newly built home demand. But the Senate chose a more expensive yet long term relief for those who may lose their homes from repossession.
Even home builders choose to put foreclosure relief first before government incentives to new home construction buyers. A survey said that builders would rather prioritize consumer confidence, decrease the pile of unsold houses in the market and decrease foreclosure.
This $275 billion foreclosure relief plan would want to help 9 million troubled homeowners to refinance or modify their loans. $200 billion of this relief plan would be directed to help 5 million compliant families but cannot afford to refinance anymore due to loan problems. Through Fannie Mae and Freddie Mac, they can refinance under 20 percent of their equity.
Then, $75 billion would be allotted to encourage lenders to modify mortgages of 4 million foreclosure troubled homeowners. The government would ask lenders to lower interest rates to make payments not more than 38 percent of the monthly income. Then, the government will match the lender’s input to lower the dues another 7 percent so borrowers can pay as low as 31 percent of their monthly income.
Another incentive to the lenders is the rejection of the proposed bankruptcy law changes. This bankruptcy law would have allowed real estate judges to adjust loan terms. The banking community opposed this step for it would have risked permanent high mortgage rates.
But could the foreclosure relief plan do enough to attract new home building purchasing again? This plan can reduce house payments, but with the still negative equity situation and home depreciation the only hope for construction re-stimulation is market improvement and home value increase.
