As Riverside County loan modification attorneys, we've been following the news since winter about an Obama administration plan to help the states it believes was hardest hit by the bursting of the housing bubble. Using funds from TARP, the "bailout" program initiated by former President Bush, the administration has set aside $1.5 billion for five states with particularly dramatic drops in their real estate markets: Arizona, California, Florida, Michigan and Nevada. The administration hopes to use the states' efforts as a "laboratory" to see how the nation as a whole could respond better. On April 27, the Wall Street Journal reported that proposals from all five states are submitted and under review by the Treasury Department.
Only three of the states have released details of their programs. California, which received the largest share of funding at $700 million, is not one of them. But among the states that did allow their programs to be made public, two themes emerged: help for people struggling with long-term unemployment, and writing down loan balances for qualified borrowers. In Arizona, three-quarters of the $125 million in funding will go to a program that matches banks' write-downs of up to $50,000 in loan principal. Another chunk of funding will help eliminate second mortgages that may be holding up loan modifications. Florida proposed to use the bulk of its $418 million to help unemployed borrowers make mortgage payments, for up to nine months. It will also help new homebuyers make down payments and fund legal services for foreclosure prevention.
In Michigan, the state's $155 million will go partly toward paying up to half the monthly payments for unemployed borrowers. Michigan also plans to use $31 million to encourage principal reductions for underwater borrowers, matching up to $10,000 in write-downs by banks. Many observers consider principal reductions the best way to stop foreclosures among deeply underwater borrowers, but opponents claim they would encourage borrowers to abandon their mortgage payments. For that reason, the Arizona effort narrowly targets borrowers with one home and no history of using HELOCs.
Our Pomona loan modification lawyers are disappointed not to see California's proposal, but very encouraged by the proposals we do see. We have advocated programs to write down principal since early in the housing crisis, in part because of studies showing they work. When a borrower is deeply underwater, paying a mortgage starts to look foolish -- and that gives the borrower an incentive to walk away. Restoring just enough equity to keep the borrower in place stabilizes the housing market and protects the investments of both the bank and the borrower. Similarly, experts now believe unemployment is a major driver of foreclosures throughout the United States, taking away borrowers' ability to make payments on homes that were once within their means. We look forward to seeing how well each state's programs address these problems and, if they work well, seeing them adopted across the United States.
Since the housing crisis began, Howard Law PC has represented clients seeking loan modifications. Unlike the many fly-by-night loan modification companies that sprang up in 2008 and 2009, we have been established in Southern California for years and are subject to state ethics rules and penalties for breaking them. In fact, we're proud of our history of success getting loan workouts for our clients, which includes cases of reductions in interest rate, changes to loan structure and sometimes even principal reductions. Our Redlands loan modification attorneys believe banks respond to us because we are attorneys, which means we know our clients' rights and how to protect those rights. We prefer to resolve our cases outside of court, but if the circumstances demand it, we absolutely will file lawsuits against negligent or exploitive banks.
If you're struggling to get your home loan modified and your lender isn't giving you meaningful help, you should call Howard Law right away. To set up a free, confidential consultation, you can send us an email through this site or call 1-800-872-5925.