The State of the Union for Average Americans Facing Foreclosure

As the mortgage crisis continues on, ironically, President Obama seemed right at home at the podium during his 2010 State of the Union address just as millions of Americans face losing their home. As a result, many concerned citizens sought in the President’s national address any signs not only of “hope” or “change”—expressions made famous during his campaign days—but also second year specifics about what a new year would mean for the millions of average Americans, just like them, facing imminent foreclosure.

In that address, the President laid out an ambitious agenda attempting to attack one specific problem from every conceivable angle: the terrible economic squeeze on America’s middle class.  One portion of his plan mentioned helping Americans stay in their homes, retain their home's value or absolve home debt, as the President works to “lift the value of a family’s single largest investment.”

President Obama revealed he intends to “step up” programs that encourage re-financing for affordable mortgages. Yet, while the President made clear that he would be increasingly busy in his second year on many fronts, many critics charged that his speech, as well as homeowner assistance policies to this point, has been short on specifics of how to put government to work for those average Americans facing the loss of their homes.

Under the President’s current and primary homeowner assistance plan, the Home Affordable Modification Program (or HAMP),  “responsible borrowers” who have unpaid principle balances of less than $729,750 (for one unit) from a mortgage originating prior to January 1, 2009 may qualify for loan modification assistance if your mortgage payment is greater than 31% of your monthly gross (pre-tax) income.

In addition to flack the President received for only providing housing help for the fuzzily defined “responsible homeower,” apparently the plan, as of last month, has been less than successful for even the most responsible of borrowers. According to a recent Treasury Department report, 27 percent of the 650,000 homeowners taking part in the mortgage modification program are now delinquent on their mortgage payments.  In fact, only 1,711 participating homeowners attempting to avoid foreclosure have been able to convert their modifications to permanent status. Homeowners facing foreclosure and needing help to secure a loan modification have been encouraged to visit http://www.makinghomeaffordable.gov.

To clarify, this type of organized modification effort does not constitute a refinance as the President spoke of; it’s simply a retooling of the mortgage, including a term that might be extended or an interest rate that could be adjusted.  Yet last night, the only thing the President said about the help distressed homeowners might get was this:

The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up re-financing so that homeowners can move into more affordable mortgages.

The President never specifically mentioned HAMP, how HAMP might need time to work, or how it could be fixed.  And, most notably for some, he did not mention the word “foreclosure,” at all.

So, as foreclosures continue to escalate, American homeowners may feel that they have increasingly fewer options other than bankruptcy. Of this option, the President had a more definite response, with recent efforts to allow bankruptcy proceedings to renegotiate all debts, including home mortgages.

As American homeowners search for more immediate and specific mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Offices of John T. Orcutt for a totally FREE consultation at +1-833-627-0115.