Banks to Benefit Most from White House Program to Help Fight Foreclosures

The Hill
August 15, 2010
Needham, Vicki

According to some housing experts, banks may get the biggest benefit from the Obama administration's $3 billion funding infusion designed to help jobless homeowners avoid foreclosure. The fund allots $2 billion from the Treasury Department and $1 billion from the Housing and Urban Development Department for the states hit hardest by the housing market crash and unemployment. According to Dean Baker, co-founder of the Center for Economic and Policy Research, "Giving money to the banks isn't what the government should be doing right now" because new funding it unlikely to do too much good for the multitudes of people who are underwater on their mortgages. He suggests that the funds be used to cover any of the struggling homeowners' needs, not just mortgage payments. Baker also proposes a program that would allow homeowners to rent their home back from the bank at a lower payment for five years, providing security for those struggling to make payments and incentive for banks to negotiate with homeowners. The federal program plans to direct $2 billion to the "Hardest Hit Fund" and $1 billion to the "Emergency Homeowners Loan Program," which will provide zero-interest loans of up to $50,000 for two years and be divided between 17 states and the District of Columbia. The Obama administration's Making Home Affordable program has helped far fewer people than its proponents had hoped it would; and some lawmakers, including Rep. Darrell Issa (R-Calif.) question the validity of "committing even more money in a failed program that ultimately isn't helping those who need it the most."
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