House Financial Services Committee chairman Barney Frank is reportedly floating a proposal that would use interest collected from TARP to fund a program for unemployed homeowners that are unable to pay their mortgages.
Frank said the plan would provide loans (presumably short term ones) to struggling homeowners until they were able to find another job, thereby reducing unnecessary foreclosures.
A lack of support for jobless homeowners has been cited as a weakness in the Making Home Affordable program, which has helped 650,000 borrowers get their hands on a loan modification since its inception earlier this year.
A recent report by a congressional oversight panel said the program wasn’t designed to address foreclosures caused by unemployment, which some claim is now the primary driver of default.
In fact, a report released back in April by the Boston Fed found that home price depreciation was a leading cause of mortgage default.
Yet the programs currently on offer fail to address those concerns and others, such as what to do with those who hold jumbo mortgages.