Foreclosure Help

To ease the problem of foreclosures the American government had introduced a new plan known as American Homeowner Resurgence Plan . Following the new bill a $300 billion authority had been created for refinancing mortgages into FHA. But this did not inspire lenders to write down mortgages. So, the problem of foreclosures remained where it was.

The bill aimed to reduce foreclosures that would, in turn, resolve uncertainties related to mortgage values as well as mortgage-backed securities. In the process the current credit crunch would be mitigated and also bring down the downward pressure on home prices. And most importantly it would reduce the incidence of evicting people from their homes.

The bill had its fall outs. The tax payers had to bear the cost of the bill. At the same time it seemed to reward reckless lenders and borrowers. The only apparent benefit was to reduce foreclosures and so those favoring the bill argued that it is in the interest of the economy.  

The Mexican "Punto Final" plan of 1999 had a modest approach to deal with the problem and many argue that the government should follow this model. The Punto Plan resulted led to considerable debt write-downs very quickly. According to the Punto Plan the government would, on a proportional basis, bear the losses borne by lenders from mortgage principal write-downs. For example, tax payers would share 20% of the lender’s write-down cost if there is an agreement for voluntary renegotiation between borrowers and lenders. The agreement between the two parties should be such that borrowers are able to qualify for refinancing under the FHA facility.

This Punto plan would cost the government only about $10 billion. On the other hand it would in no way provide benefit to reckless borrowers.  This proposal can help avoid foreclosure without causing to much of a strain on the tax payer..