According to White House economic advisor, it is expected that somewhere between 10 million and 12 million foreclosures are going to happen over the next three years.
And the White House along with other government institutions have released a plan designed to help at least some of the millions of people who may fall into the foreclosure statistics.
Today, it was announced that the Obama administration is launching a plan to reduce the principal amount that some people owe on their homes as well as give people who have lost their jobs and own a home a temporary financial break.
According to the Associated Press:
The new effort is designed to help two groups:
Borrowers who owe more on their loans than their houses are worth. Nearly 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.
These people would be helped in either of two ways: Their mortgage companies can cut the total amount they owe on their mortgage. Or they can refinance into loans backed by the Federal Housing Administration, which insures loans against default. The FHA will get $14 billion in incentive money from the federal bailout fund.
Unemployed borrowers. People receiving unemployment benefitswould see their mortgage payments drop to no more than 31 percent of their monthly income — but only for three to six months. That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments.
What is somewhat unusual for this plan is that it is the first time I have seen the administration actually come out and say that they don't expect it to solve the foreclosure crisis - that it was only going to (hopefully) make a small dent in the problem.
And as of today, somewhere around 6 million homeowners are behind at least 2 months on their mortgage payment, which is not a good sign.
Will it help?
Time will tell.
But I don't expect much.