The Obama Administration has decided to extend bailout funds to investors who purchased multiple homes during the recent housing bubble.
Under newly updated terms of the Home Affordable Modification Program or HARP, in May landlords can start to qualify for modifications on up to four loans, a major change from the Administration’s original aim to avoid offering aid to anyone who helped fuel the housing crash. About 700,000 of these investors will now be eligible for lower interest rates, longer loan terms, and even reduced mortgage principal, all backed by taxpayer funds.
During the first several year of HARP only mortgages for owner-occupied homes could be modified, but since less than 1 million homeowners took advantage of the program, when the government expected to help 3 million to 4 million, the administration is now extending the help to investors to push vacancy rates down.
“When we started the program we focused on owner-occupied houses because the need was so great and we wanted to target the efforts to that group,” said Timothy Massad, the Treasury’s assistant secretary for financial stability as quoted in a Bloomberg article. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.”
Still this move is likely to anger many who blame investors for artificially inflating the housing market with their buy-and-flip speculations.
Even the New York Federal Reserve pointed fingers at investors for exacerbating the housing crisis, as they wrote in a September report.
“In part by apparently misreporting their intentions to occupy the property, investors took on more leverage. . .these marginal borrowers appear to have contributed substantially to both the increasing amount of real estate related debt during the boom, and to the rapid deleveraging and delinquency that accompanied the bust.”
Others worry that the true result of this aid expansion will only be an extension of housing pain, prolonging the process of liquidating foreclosed properties.