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Some $2 billion in bail out funds that banks have repaid to the Treasury would be loaned to unemployed workers to help them avoid defaulting on mortgages losing their homes to foreclosure under legislation being drafted by Rep. Barney Frank, (D-MA), chairman of the House Financial Services Committee.
Frank has long advocated using money from the $700 billion Troubled Asset Relief Program to help troubled homeowners, and in January he introduced legislation to direct $50 billion of the TARP funds remaining at that time to funding a program to prevent foreclosures.
Last month job losses exceeded expectations. The 263,000 lost jobs represented the 21st consecutive month of job losses and unemployment rate reached a 26-year high of 9.8 percent. The current employment recession was already the worst recession since WWII in terms of percent of job losses. Economists expect the unemployment rate will probably be above 10% soon.
Foreclosures, most of which are increasingly caused by a combination of negative property values coupled with unemployment, have also reached record levels. Total foreclosure activity in August remained close to the record high set in July thanks to increasing defaults and scheduled foreclosure auctions, according to the latest RealtyTrac. Reported increases in delinquent loans owned by Fannie Mae and Freddie Mac indicate high levels of foreclosures will continue.
According to reports, Chairman Frank will introduce his legislation next week.
From
Real Estate Economy Watch
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