Desperate officials in US hatching new plans to stem foreclosure crisis

in Market News

24-1[1]US government officials are considering a plan that would let property owners who have fallen behind on their mortgage payments to avoid eviction by renting their homes instead.

Also at state level new measures are being introduced to try to stem the escalating number of foreclosures which are regarded as holding back confidence in the real estate market.

The Obama administration earlier this year announced that first time home buyers would receive a federal tax credit of up to $8,000 in 2010 if they completed on a property purchase by 1 December this year.

But the programme has been criticized because it did nothing to help buyers with initial down-payment requirements and there is concern about soaring numbers of defaulters. US foreclosure filings, that is notices of default, auction or bank seizure, rose to a record in the first half of 2009. More than 1.5 million properties, one in every 84 US households, received a foreclosure filing, up 15% from a year earlier.

So new plans are urgently required. Under one idea being discussed, delinquent homeowners would surrender ownership of their property but would continue to live in the property for several years.

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their property loans, using an unused portion of a $50 billion housing aid kitty.

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits.

Illinois is among a number of states that are introducing help measures. The Housing Development Authority announced it will offer short-term, interest-free loans of up to $6,000 to be used as down payments on property purchases. Some $50 million has been set aside with the aim of helping up to 500 people.

Even the mortgage lenders are offering more help. Freddie Mac, which has an estimated 30,000 foreclosed homes it can’t sell, has introduced a sales promotion that includes a free two-year home warranty. The company also said it would pay up to 3.5% of the property’s sales price toward the buyer’s closing costs.

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