The United States government has tried to take steps to help homeowners who are facing foreclosure, but the federal legislative efforts have provided only limited assistance. The Making Home Affordable Program makes it possible to lower payments on first and second mortgages and even refinance homes that are underwater, but it does not provide direct debt relief to homeowners or, in most cases, reduce the balances on mortgages owed. Miami foreclosure lawyers know that many homeowners continue to face debts they cannot pay, and continue to live with the worry that their bank or lender is going to take their home.
Not every government, however, has chosen this indirect approach to helping homeowners by simply encouraging them to work with lenders to take advantage of relief. Reuters has announced that Iceland has launched a debt relief package for households, which will be financed by tax hikes on financial institutions and which will be financed by a haircut on $4 billion in debts that are owed to overseas investors who had money in the country’s banks that collapsed in 2008.
Iceland Offers Direct Aid to Struggling Homeowners
Iceland, like many other places throughout the world, experienced a financial crisis in 2008. The crisis was the deepest ever for Iceland, although there has been a slow recovery occurring. Even amidst the recovery, there are many thousands of homeowners who have high mortgage balances and monthly payments that they are simply not able to afford to cover.
Iceland expects to help more than 100,000 of these households with a $1.26 billion (150 billion krona) debt relief program. The debt relief will apply to 1.36 trillion in mortgages that have been linked to inflation. The breakdown of the package includes:
- Tax breaks encouraging homeowners to pay down their mortgage debts using pension savings (70 billion krona)
- Debt relief of up to 4 million krona per affected household (80 billion krona)
The program will run for around four years, and most of the foreign investors who will be hit with the haircut on the debts Iceland owes are hedge funds, as fund managers bought Iceland’s debt at a deep discount after the crisis.
The net impact on the Icelandic Treasury is expected to be insignificant from 2014 to 2015, but many households will be helped tremendously by getting this assistance with high mortgage bills. It is believed that providing this assistance will help to spur consumer spending and bolster economic growth. Some, however, are concerned that the program will hurt Iceland’s credit rating and deter foreign investors.
It remains to be seen whether Iceland’s actions pay off in the long run and whether the economy is helped by providing this relief to homeowners. The assistance, at least, should make it possible for more people to stay in their homes. It is a different approach from the one taken in the United States, and such an approach would likely be difficult to consider in the political climate in the U.S. at this time.
Still, looking for innovation solutions to help homeowners facing foreclosure is always a laudable goal, and when programs are successful, this can help to increase the chances that they will be tried in other locations facing similar foreclosure and financial problems.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
More Blog Entries:
Miami Foreclosures Expected to Spike in Wake of Government Shutdown, Oct. 14, 2013, Miami Foreclosure Lawyer Blog