Many Repossessed People Still Benefit from the Government's Repossession Scheme
The British government announced over a year ago a program to assist families in foreclosure who are facing income loss. It has been implemented, it helped very few families and cost taxpayers millions.
Homeowner Mortgage Support Program
The announcement of the Homeowner Mortgage Support Scheme (or HMS) was made over a year ago to great fanfare by the government. HMS was designed to assist struggling borrowers in staying in their homes during difficult economic times. This scheme allows homeowners to reduce their mortgage payments up to two years after they lose income. Although the UP Scholarship Status scheme has helped 15 families, it still costs 2.5 million pounds. The average home price is $165,000 so the government could have saved money if they just bought the homes for the families.
Where are the Struggling Families located?
HMS is only one program that the government offers to help homeowners in need. Others have provided equity loans that allowed families to lower their mortgages, or to rent out their homes to tenants. Although 1 in 1000 households are at risk of repossession, HMS has not been able to provide the help they need. There are other programs that can be more tailored to their needs. HMS is not as effective as you might expect.
Where did all the money go?
The government spent 2.5 million pounds to assist 15 families but they continue to defend the program . The majority of the money spent went to set-up costs that will not need to be repeated this year. The money was also used for development and policies. HMS is still available to thousands of homeowners who are in danger of repossession. The government also believes that more families will need the safety net next year.
Does the scheme work?
HMS may not have been effective even if it was only used to cover development and policy costs. HMS spent more money helping 15 families to reduce their mortgage payments over the past 2 years than the cost of 15 homes at the current per-family rate. The initial costs were too high, and it was perhaps this that led to the failure of the plan's development. The government claims that more families will be able to access the safety net in 2010, so it seems like the program will continue. It remains to be seen if the cost per family will be lower than it is now. This would make sense. It's also puzzling that this program is still being used if there are other programs. There are undoubtedly ongoing costs associated to the scheme.
