JONESBORO, AR (KAIT) – Officials with the Jonesboro Housing Authority reacted to Friday's announcement that the Obama administration planned to pour $14-billion into a foreclosure-prevention program already valued at $75-billion. The move offers incentives to mortgage lenders who reduce principal balances on loans where owners pay more than what their property is worth. The move would also grant new loans backed by the Federal Housing Administration on underwater loans.
"We are a HUD approved counseling agency and people are able to access us through 1-800 number when they are referred to help them understand the process whenever there is a loan modification or a mortgage delinquency problem," said Sheila Reddig, Counseling Coordinator for the Jonesboro Urban Renewal & Housing Authority.
According to the Jonesboro Board of Realtors, eight people sold their homes for less than what they were worth in 2009. So far, five people have short-sold their homes in 2010. Those numbers are according to statistics from the Multiple Listing Service.
"I try to help them at least know that the bank, or help them believe that the lender does want to work with you because it's more to their benefit for you to stay in this house than for them to have to foreclose on it," said Reddig. "I remind my clients of that because they're, when someone is trying to take that from you, you're very angry and you're not just dealing with losing your house, you're dealing with the problems that have caused you to lose that house."
Reddig said many people fall into financial trouble when properties around them fall into foreclosure.
"A lot of people have done a 100% loan or a minimum down payment of 3-3 ½% so they did not go into their home with any equity," said Reddig. "Very few people put down very much money on their home."
Reddig said her office has not received many calls about foreclosures resulting from bad loans. She said most people get into trouble due to job losses.
"The calls that I have had most of the time have been economy related," said Reddig. "They might not be able to pay their mortgage they they've been able to pay for years, so the economy and the loss of jobs and the businesses shutting down, employees being laid off and people losing their income is more of what I've dealt with."
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"I had some people that contacted me that were one month, two months behind on their mortgage payment simply because they had to protect their family's safety and welfare during the ice storm," said Reddig. "Due to economic conditions, those people did not have money in savings to take care of that kind of emergency and we didn't get any help."
Obama's plan would also allow lenders to grant three months forbearance to those unemployed.
"When you're in delinquency, until you're 90 days plus delinquent on your loan, you stay with your servicer, your lender, the person servicing your loan, in collection status," said Reddig. "They can really only offer you a repayment program and that doesn't help you if you're not able to make your regular payment, you can't make extra."
"I do think that is the right tactic to make incentives for the lenders to do that because they are the only ones that can do that," said Reddig. "I think the six month moratorium, stoppage, which moratorium just means that you don't have to make a payment for six months for people that are unemployed is a really good thing. I think it's really doable and I would hope that lenders would look at that."