There seems to be no doubt that active government intervention may be forestalling the free market system in the housing market. Need a refresher, the $8000 first time homebuyer tax credit, the federal reserve buying mortgage backed securities, 90 day moratoriums on the foreclosure process, beginning to get the message? But wait, there’s more, Making Homes Affordable, extend and expand the homebuyer tax credit, loan modifications, Home Affordable Foreclosure Alternatives.

Pro or Con?

There seems to be agreement regarding the positive impact of the programs designed to assist and incentivise homebuyers. A stimulus if you will. Where consternation does seem to exist is the benefit being received by homeowner’s who are underwater on their home. I’m hesitant to use foreclosure because a “Notice of Default’ may not yet be filed, but there may be little doubt it will soon be on the way.

Numerous articles have appeared about the lack of success of loan modifications. Many of the qualifications required to successfully achieve a modification or the almost unheard of principal reduction, required financial verification that distressed homeowners simply cannot provide. Anecdotal information also suggests that financial institutions are being lenient with homeowner’s (principal residence) who are not making their house payment. Evidence indicates auction dates are being postponed to allow property owner’s every opportunity to meet their obligation. Investors on the other hand who are behind on payments are not enjoying the same benefits.

The Feds Step In

A new program being proposed would give homeowners more time to qualify for federal programs designed to avoid foreclosure. In other words after your application for a modification has been denied you would now have 30 days to respond and appeal. The bottom line is the lender could not proceed with a foreclosure. More T I M E for the property owner.

If lenders will now be required to provide written certification as to why an applicant was denied a modification, look for more information on this subject in the future. Someone (government bureaucrat) will develop written guidelines as to who and what qualifies. I think lenders will be demanding more guidance from the federal government because the last thing they want to do is have their approval or denial appear subjective.

Apparently the most successful program designed for homeowner’s in distress isn’t reduced monthly payments, but increased time. Twelve or more months of missed house payments can go a long way towards financial security.