Matt Weidner – Fighting For The American People

Posts Tagged ‘OBAMA’

The Treasury Department has allocated $75 billion to entice lenders to let beleaguered borrowers stay in their homes. And the companies getting most of that money—well, they’re the same companies that got the borrowers into this mess. At least 21 of the top 25 recipients in the Home Affordable Modification Program were major subprime lenders, according to the Center for Public Integrity. Meanwhile, not even 1 in 5 homeowners eligible for the program has gotten help.

A story in the Huffington Post, and available here reports that the federal government’s response to the foreclosure crisis is a dismal failure with a mere 33% of those who were in a trial modification converting to a permanent one.  Of the millions of Americans that are struggling, all the might and power of the federal government (and $75 billion of our taxpayer dollars) has only provided any assistance to less than 180,000 people.

• Rep. Jim Jordan, an Ohio Republican on the House Oversight Committee was more blunt: “It’s not surprising these numbers are lower than expected,” he said in an email. “This program has been a waste of taxpayer dollars and harmful to the very families it was supposed to help.”
• “I’ve come to the reluctant conclusion that the only way to accelerate the program and also provide adequate incentives for homeowners who sacrifice to stay in their own homes is through permanent, locally-tailored, unconditional reductions in mortgage principal,” he said. (Dennis Kucinich)
• A senior Treasury official told HuffPost on Monday that the department was heading towards more writing down of principal as part of its mortgage modification efforts, and that an announcement was to be expected in the next few weeks.

According to the January report from the Obama administration, the federal government has provided at least $50 billion dollars to 110 mortgage loan servicers to encourage them to modify mortgages for homeowners.  According to this report, 89% of all mortgage loans in the United States are eligible for consideration under the HAMP guidelines.

The full text of the report can be viewed here and I strongly encourage everyone to review it.  The program continues to be an abysmal failure, with an embarrassingly small number of homeowners who have benefited from the program.  (Not to worry though as reported elsewhere, the fat cat bankers continue to make massive profits.)  Some low lights from the report:

• In addition to the 116,000 permanent modifications, an additional 76,000 permanent modifications have been approved by servicers and are pending borrower acceptance. (That’s less than 200,000 nationwide people.)

• The median savings to borrowers in permanent modifications is more than $500 each month. (That’s chump change.)

• Trial modifications canceled 60,476

• 57.4% of modifications were based on loss of income

• 10.7% were based on excessive obligations

• The numbers in Florida were very low and show only 101,971 trial modifications and 14,598 permanent modifications for a grand total of 116,569

• The numbers in the Tampa/St. Petersburg area were likewise very low with only 12,752 trial modifications and 1,943 permanent modifications for a grand total of 14,695

The disappointing thing about these numbers is the banks continue to report record profits and payouts to their executives and the taxpayers are shouldering a massive burden, but it results in very little in actual benefits to consumers.  It is important that judges, legislators (such as those considering the fraudulently titled “The Florida Consumer Credit and Homeowner Protection Act”) and consumers know these numbers so they understand just how little is being done to actually assist consumers who are in need.  Spread the disappointing word…..

From an article in the Wall Street Journal…

Number of Foreclosed Homes Will Continue to Soar

Since the start of the recession in 2007, more than five million homes have been taken back by lenders. The Center for Responsible Lending estimates that as many as 13 million more homes could fall into foreclosure over the next five years.

To combat the foreclosure epidemic, the Obama administration created the Home Affordable Modification Program (HAMP) last February. As part of this program, the Treasury Department plans to spend up to $75 billion in financing mortgage “modifications” for struggling homeowners.

Since the program began, more than three million homeowners have become eligible for assistance. In turn, mortgage servicers have reached out to these borrowers, initiating the modification process. Roughly 760,000 homeowners have received loan modifications on a trial basis. But just 31,000 modifications have been made permanent.

That’s a success rate of just 1%. This means that up to 99% of eligible homeowners struggling with their mortgage payments have been unable thus far to modify their loans.

Here’s Why:

A big reason for HAMP’s limited success is that the government is suffocating banks with counterproductive accounting rules. Under current law, if a bank modifies a mortgage it must record the write-down as an expense on its books. For example, if a homeowner’s monthly mortgage payment is reduced by $400 per month for 24 months, the bank has to report that it “lost” $9,600 ($400 times 24 months).

It is widely accepted that Obama’s HAMP mortgage modification program is a failure, not helping anywhere near the number of homeowners leaders estimated it would help.  If you’re facing foreclosure in Pinellas of Florida or are simply trying to get some reduced payments on your mortgage you will find trying to get a modification a very frustrating process.  Virtually every client reports spending countless hours on the phone with lender representatives and sending documents back and forth again and again.  I was at first incredulous, thinking that one or two lenders were getting it wrong, but I am a first hand witness to an entire industry that is broken down. If you’re trying for a modification or short sale, be prepared for months of frustration and hours on the phone…..and you probably wont get what you want.

The Curious Case of Canceled Sales

Attorneys and other opponents of the lenders and the mortgage meltdown are at a bit of a loss regarding why the system is broken down, but several theories are supported by facts. Most of the major lenders reported major (breathtaking) profits during the last quarter of 2009.  Curiously many of the same lenders delayed or simply canceled foreclosure sales that they had every right to conclude during the last quarter.  They had no legal reason to cancel the sales and some cited compassionate grounds for doing so. (Ha Ha)  Bottom line is I believe some lenders canceled sales in order to depress their earnings. (Can’t get to high on the hog just yet.)

Today’s Wall Street Journal confirms that one effect of the canceled sales and slow pace of modifications is fewer home on the market and an increase in overall value.

The number of such homes available for sale dropped to 637,000 in November 2009 from 845,000 a year earlier, Barclays Capital estimated. Barclays expects the number to start rising again as people who don’t qualify for a loan modification or don’t want one lose their homes, and peak at 747,000 in April before declining gradually.

As recently as September, however, Barclays expected a peak of nearly 1.2 million foreclosed homes for sale in mid-2010. “Our projected peak keeps getting lower, the longer banks delay foreclosure sales,” spreading the pain over a longer period, says Glenn Boyd, a senior researcher at Barclays.

That has implications for pricing. The S&P/Case-Shiller 20-city home price index is down 29% from its peak in 2006 but has leveled off in recent months as fewer foreclosures have hit the market.

As of Sept. 30, about 7.5 million households were behind on their mortgages or in the foreclosure process, according to the Mortgage Bankers Association, a trade group.

Bottom line is those 7.5 million homes are going to continue to have a profoundly negative effect on the real estate market and the larger economy for years–even decades to come.  And as unemployment continues to rise, the number of households in trouble will only increase…..this is not just a problem for those 7.5 million in trouble….it’s everyone’s problem and we need a better system to address the problem.

Full Text of Article Here.