Government backtracks on foreclosures

It seems that the government is finally backtracking on its foreclosure views. Government officials are now hinting that foreclosures are necessary to enable the housing market to rebuild itself. This view is a far cry from the pronouncement that the Obama administration had just over a year ago when it made efforts at putting a cap on the incessant stream of foreclosures flooding the Real Estate market.

An official from the Treasury Department’s Homeownership Preservation Office says that a key to ensuring that the housing market remains stable is to re-sell the properties to families who are more financially capable to make the purchase.

The absence of home sales activities in distressed areas will also likely cause the market to freeze, a White House representative said.

The freeze could also hamper the progress already made at economic and market recovery, especially in those states that have received the worst hit since the economic crisis.

It can be recalled that Obama had introduced a loan modification program in February 2009, which became his administration’s signature response to the growing number of foreclosures across the country. The program was originally aimed at curbing foreclosure incidents and targeted at relieving troubled borrowers of high interest rates and monthly payments.

Obama had earlier said that the government recognizes that foreclosures could have adverse impact not only on the homeowner himself, but also to everybody in the community as they could trigger a series of ill effects, such as a drop in home values, business failures and unemployment.

Experts say that the new views on foreclosures that the government has been expressing lately could be attributed to the failure of the loan modification program to prevent the increase in the number of foreclosures as well as delinquent loans.

Notwithstanding this new development, the administration still seems bent on giving homeowners a way out of foreclosures. New programs and initiatives, aimed at giving cash-strapped borrowers a relief, are set to roll out this year.

The government is also pushing for a review of mortgage institutions policies and procedures and is demanding for loan servicers to comply with state laws.

But this latest foreclosure policy could be responsible for the non-support that the government is giving to a foreclosure moratorium nationwide amid the paperwork scandal. The administration continues to express its belief that foreclosures are necessary for the housing market to reach a more stable ground.

The administration clarifies that this view is not a departure from any foreclosure policy. The loan modification program only serves to mitigate the effects of foreclosures and does not actually discount the possibility of them happening.