Due to recession in the world market, most of the people are really worried about their jobs and incomes. It also caused dissolution of many mortgage and banking companies. Reason of the dissolution is the recent reduction in the payments from the creditors and also the lost confidence of general public. Most of the people are not able to pay their mortgage monthly payments timely and banks exercised foreclosures. When conditions were not getting better, government had to step in and introduced many federal programs to stop foreclosure.
A foreclosure affects the economy from two sides. First it reduces a bank’s business and second it snatches a house from householder that creates an environment of tension over all. So the basic theme of the federal programs to stop foreclosure is to help the homeowners to save their homes. Some of the federal programs to stop foreclosure are given below;
Central Bank is injecting more money in the economy. It will have positive effect on overall earning of the people. When they will earn more, they will be able to easily make their payments.
Direct Injection in the market has a negative impact as well; it will increase the inflation that will have direct impact on the interest rates.
Another federal program to stop foreclosure and giving some support to the banks and mortgage companies was lowering the price of Dollar. Low Dollar Prices will provide support to the exporters who will export more and bring more money in the United States of America’s economy.
Giving some relaxation to the home owners is also a program among numerous federal programs to stop foreclosure. In these programs federal government insisted banks to introduce some relaxation schemes to the homeowners. These schemes are changing in the repayment plans, loan modification, freezing the interest rate and mortgage forbearance.
Consequences of Government intervention
These are all the federal programs to stop foreclosure introduced by the government. But it was a lot better if government had not intervened in the open market operations. Federal programs to stop foreclosure gave just short term benefits but if you see the drastic affects in the long run, you will be really shocked. All the steps were to increase inflation that is already not under any control. Experts feel that the above mentioned decisions were taken by the people having no financial back ground otherwise any person having a bit of financial background can understand the drastic affects of the above mentioned federal programs to stop foreclosure.