The Obama administration finally got the wake-up call that banks are doing little to counter the housing crisis that is still destroying the American dream of home ownership.
The Federal Housing Administration today ordered banks to extend the mortgage-payment grace period for unemployed homeowners to 12 months for the FHA and Making Home Affordable Program guaranteed loans.
Housing and Urban Development Secretary Shaun Donovan said the FHA new policy was required since few lenders took it upon themselves to voluntarily offer 12-month forbearance periods to unemployed homeowners. Banks have provided a four-month grace period, which amounts to spit in a bucket in a lousy economy like this one.
"We have been disappointed that more services haven’t gone beyond the four months. The reason we took this step now is that in every case that they are doing this, that they go to that 12 months," Donovan said.
"Part of why we are doing this, is to set a single standard, is to try to push the broader market to extend their unemployment programs and forbearance programs," Donovan said.
Obama, who is finally beginning to take a hard look in the rear-view mirror, admitted yesterday during his Twitter Town Hall that his administration’s policies aimed at countering the housing crisis were "not enough."
"The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected," Obama said.
"And so we’re going back to the drawing board," he added.
Some observers believe Obama is taking another crack at easing the housing crunch as part of a re-election strategy, while others think he may have finally realized that he has given Wall Street and the banks a big wet kiss, even as their greed has turned the American Dream into a nightmare.