The good intentioned programs set forth by the Obama Administration to aid struggling homeowners have failed. Last week, we checked in on the Home Affordable Modification Program (HAMP) and revealed that the rate of failure had accelerated.
The HAMP program promised to relieve three to four million homeowners in America and over a year into the program, barely half a million have actually seen aid. US Treasury Secretary Tim Geithner confirms that the original goal will not be met.
HAMP has spent $840 million of the $29 billion of Troubled Asset Relief Program (TARP) funds with most of the housing programs in TARP not aimed to recover funds, rather acts as a crutch to struggling homeowners.
The goal of helping the struggle of the homeowner is a noble cause, but the programs in place are ineffective, even according to those who helped design them and have failed. The US House of Representatives Financial Services Committees is scheduled to vote next week to kill the programs as the cost can no longer be justified. There will be a subcommittee hearing on the programs on March 2 and an amendment and voting session on the termination bills on March 3.
The programs have failed, now what?
Not one to give up on an agenda, Obama has a new plan already in the works as his old plan gets the guillotine. Obama wants loan servicers to commit to reducing loan balances for underwater borrowers with the costs not carried by investors who bought mortgage-backed securities.
The idea is that this would force the worst offenders of foreclosure blunders to take the loss by writing down the loans they serviced on behalf of Fannie Mae and Freddie Mac. In essence, the Administration is asking loan servicers to come up with their own mortgage modification programs.
If addition, several state attorneys general have claimed they are pushing for loan servicers (particularly the largest) to pay over $20 billion in civil fines based on their bad behavior. These fines would go toward funding local loan modification programs.
Is that really the fix?
So HAMP and other programs fail miserably. Obama tells the banks they’ve been naughty and they need to come up with their own programs and reduce principle on underwater borrowers. Attorneys general tell the bank they’ve been naughty and they’re going to punish them and the fines will go toward the people the bank most wronged.
It seems that the loan servicers failed at keeping their noses clean when the government was handing out free money, how will punishing them civilly or telling them to fix it themselves work if they couldn’t behave in the first place? The loan servicers couldn’t pull it together when the modification money was free, I can’t imagine how they’ll perform any better when they’re being politely asked by the Administration to pony up billions of their own money to help homeowners. This isn’t going to be pretty.
Pauline Scoggins via Facebook
February 24, 2011 at 3:31 pm
simply amazing, eh?
David G
February 25, 2011 at 8:07 am
Lani,
HAMP is the Home Affordable MODIFICATION Program, not the Home Affordable MORTGAGE Program. Check it out.
HAMP is the unsuccessful step-sister of HARP. HARP, the Home Affordable REFINANCE Program, has in fact been very successful in allowing existing homeowners to access lower rates.The only problem with HARP is that it’s only applied to loans backed by the GSE’s. If the banks had got on board with HARP, the situation wouldn’t be in as much of a mess as it is. HARP was Obama’s plan and it worked. It was also Obama’s plan to buy up MBS’s to drive down rates and that plan also worked. If Obama made a mistake with any of this it was not forcing the TARP banks to go the HARP route instead of just settling for the promise that banks would make a go of HAMP. If BofA and co. had refinanced distressed owners at the recent low rates as per the HARP plan things would look a lot better than they do today.
Them’s the facts. I’ll leave the politics to you.
David
Benn Rosales
February 25, 2011 at 8:45 am
Hi David!
Corrections for typos are best sent through email, we always enjoy hearing from you. We certainly appreciate the catch and your comment.
all the best,