The White House is setting aside $3 billion to aid unemployed homeowners keep their homes announced this week.
This housing fund will is divided down to $2 billion from the US Treasury and $ 1 billion from HUD the Department of Housing and Urban Development. The government will loan home owners $50,000 in order the keep owners in homes during these difficult times. The loans will be sent to the 17 hardest hit states in the Housing Crisis including California, Arizona, Nevada, Illinois; Michigan, Ohio and Florida.
But critics say that homeowners won’t benefit from the loans the banks will:
“Giving money to the banks isn’t what the government should be doing right now,” said Dean Baker, co-founder of the Center for Economic and Policy Research.
“I’m not a big fan; it’s ill-conceived,” he said. Baker said with large number of people with homes underwater the plan won’t work.
“You need to make sure that someone benefits from the program other than banks,” he said.
Baker says the plan should not go pay the mortgage but to use for other needs. Baker has an idea of the bank by house and rent the property to the homeowner at a lower rate.
This way homeowner would could stay in the home for at least 5 years and hopefully build up equity.
David Abromowitz, senior Fellow at the Center for American Progress says banks must give concessions to help the homeowner before getting the funds.”My concern is what are we asking from lenders who are going to get the benefits source to pay those loans for 24 months,” he said.
The plan doesn’t require banks to cut principle nor make loan modifications.
“Banks also should be required to share in the burden being faced by homeowners,” he said.
Abromowitz has concerns about the program, but the plan reduces”anything that slows or stops foreclosures is good.”
“It’s targeted well toward people facing a temporary situation when they can’t pay their mortgage because of unemployment,” he said.