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SPEA Paper Says Federal Mortgage Relief Programs Ineffective

A publication written by professors at IU’s School of Public and Environmental Affairs, or SPEA, claims the number of homeowners who are underwater on their mortgage — meaning they owe more than their home is worth — has not been slimmed by the administration’s Home Affordable Modification Program, whereby banks forgive some of what’s owed.  IU Assistant Professor Ashlyn Nelson helped author the brief.

“Over a nine-month period, for example, one report found that on average folks who even had received these medications were re-defaulting at rates of 60%,” she said.  “Some other folks claimed that fewer than 4% of the folks who qualified for this program were being helped by this policy.”

Nelson noted Bank of America has undertaken a program suggested as a possible fix by some economic watchers, whereby loan principal is forgiven, rather than simply nixing loan interest which has accrued as the loan has gone unpaid.

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