Government Explains Help Offered To Some Foreclosure Victims

December 20th, 2007

Paulson the US Treasury Secretary is on a tour trying to booster up support for the government for its foreclosure relief plan. He underlined that the plan was not a blank bail out for people who contracted reckless agreements. In an interview with a television channels he said that foreclosures are bad both also for lenders and as investors as well as borrowers.

The government has temporarily frozen teaser rates on sub-prime mortgages for five years so that some of the borrowers would not have to face increased reset charges. But the Bush administration’s scheme has not been enthusiastically received by all. Skeptics feel it will make lenders shy away from future lending with this precedence of government interference on agreement matters. Some feel that borrowers should pay the price for having been greedy.

The meeting was attended by about 200 community members that included lenders, counselors and social activists. Paulson explained the role of the Treasury in brokering the deal. The Treasury was keen to bring the affected parties face to face to mutually to thrash out matters. The government did not want to nose into the normal functioning of the market. All that the government wants is that there should not be a failure in the market.

From Kansas City Paulson went to Stockton, the foreclosure capital of USA, to attend a joint meeting with the Governor of California, Schwarzenegger. Stockton holds a record of one foreclosure for every 31 houses during the last third quarter this year. Both Paulson and Schwarzenegger admitted that the mortgage modification would not help all – particularly those who have defaulted or are in the foreclosure zone already. Nevertheless it is a beginning and would reduce the numbers by a sizeable chunk. Everybody cannot be helped but some will be helped – explained the governor.

In a last minute attempt to check a repetition of lax lending rules the Federal Reserve came forward with new protections for the sub-prime borrowers so that they do not succumb to foreclosures. From now on the lenders would have to clearly define who can afford the mortgage apart from providing details of brokerage that will be listed with annual charges like those for property and insurance.

Simultaneously the US House of Representatives passed a law on Tuesday that would negate previous rules of considering money saved on a foreclosure modification as income.