Posted on Fri, Oct. 30, 2009
WASHINGTON - Using taxpayer funds to keep out-of-work homeowners in their homes until they find another job is an option being looked at by some officials in the Obama administration, according to people familiar with government financial-rescue programs.
Elizabeth Warren, chairwoman of the Congressional Oversight Panel, and a gaggle of Pennsylvania groups representing troubled homeowners, are pressing the Treasury Department to consider using some federal Troubled Asset Relief Program (TARP) to give government bridge loans to people who have recently lost their jobs. The loans would not accrue interest until their income is restored.
The oversight panel argues that the Treasury's current mortgage modification program focuses on people having sub-prime mortgages they can't afford. Panel member Richard Neiman contends that the second wave of foreclosures is coming - one based more on loss of income and unemployment, as the crisis has emerged.
"The mortgage crisis may have begun with unaffordable sub-prime or exotic loans, but it has expanded to capture an increasing number of homeowners with traditional, prime loans as the recession lingers," Neiman said.
"What we're recommending to the administration is that they give people this loan until they get back to work," said John Dodds, director of the Philadelphia Unemployment Project. "If you don't deal with the people who lost their jobs, you are missing half of the problem and if these homes go into foreclosure it's bad for the broader economy and bad for neighborhoods, it's hard to recover."
Treasury spokeswoman Meg Reilly said the department continues to study further ways to help unemployed homeowners. She added that the Treasury has taken "unprecedented steps" to help unemployed Americans, including the provision of 79 weeks of unemployment benefits, an additional $25 a week in benefits and a subsidy for COBRA health insurance.
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