Officials of the Home Affordable Modification Program are shocked at the outcome of how Obama’s initiative has failed to pull through. The initiative was aimed at making homeowners smile away courtesy of the reduced home ownership prices. The program has however been deemed a failure courtesy of bad economics.

With home buying one thing is guaranteed, the home being bought is pricier than the mortgage to be paid out. The reason for this is that many take out mortgages that do not fully cover for the houses they are buying. Repayment in full through foreclosure of a house by the lender (selling it to someone else) can be done in case a borrower defaults.

The price of houses has dramatically fallen over the years. 2009 is a year where houses fell below the prices of the mortgage.

“loan modification” formulas simply known as debt forgiveness was announced by the Federal home Loan Mortgage Corporation, Federal National Mortgage Association and the Federal Deposit Insurance Corporation, during George W. Bushes term. This policy was also forged on by president Obama courtesy of the Treasury Department, hence the Home Affordable Initiative.

The modification programs have encouraged numerous lenders to reduce the payments, inclusive off insurance, taxes, interests and principals borrowers have been eased off a heavy burden, which includes saving them a lot from their gross incomes.

The reduction a borrower gets from will hugely depend on his income, if one earns less, then the lesser the reduction and the higher the borrower’s income the higher the reduction. The lender is entitled to that house payment regardless of the borrower’s expenses and financial constraints.

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