By Jim Puzzanghera | The Obama administration on Thursday announced changes to its controversial initiative to ease home foreclosures, expanding public outreach and eligibility in response to sharp criticism that the $75 billion program had been ineffective.
Among the changes to take effect June 1 is a requirement that companies servicing mortgages must screen every borrower who has missed two or more payments to determine whether he or she is eligible for the Home Affordable Modification Program. If so, the servicer “must proactively solicit those borrowers” to participate. Those companies also are required to make quicker decisions about eligibility and speedily process documents.
And the program is being expanded to include borrowers who have filed for bankruptcy protection.
Assistant Treasury Secretary Herbert M. Allison Jr. announced the changes at a hearing about the program by the House Oversight and Government Reform Committee. Lawmakers from both parties have been critical of the program’s effect on home foreclosures.
The program was launched last spring and offered cash incentives to banks and other companies servicing mortgages to reduce monthly payments for borrowers in an attempt to keep them in their homes. The goal was to modify 3 million to 4 million modifications through 2012.
But the program got off to a slow start, and as of the end of February, just 168,708 mortgages had been permanently modified. More than 1 million three-month trial modifications have been started, but conversion to permanently reduced payments has been difficult amid complaints from homeowners of bureaucratic runarounds and delays by servicers.
“We continue to hear numerous reports of borrowers who want to participate in HAMP, but just don’t know where to begin,” said Rep. Edolphus Towns (D-N.Y.), the committee chairman. “If they do begin, they often encounter unresponsive lenders, repeated incidents of lost paperwork and a variety of other administrative frustrations.”
Towns said the number of permanent modifications “appears to be extremely low.”
Rep. Darrell Issa (R-Calif.), was more blunt. He said the program had been a failure and had increased the pain for some homeowners who had been given the false impression that their mortgage payments could be permanently lowered.
“People are making payments in hopes that it would lead to a solution, when it appears as though a great many of them should be looking for more affordable alternate housing,” Issa said.
Rep. Jim Jordan (R-Ohio) blasted the Obama administration for constant “technocratic tinkering” with the program and attempts to disguise the program’s failures. Those points were echoed by Neil Barofsky, special inspector general for the Troubled Asset Relief Program, which is providing most of the funding for the program. In a report released this week, Barofsky’s office slammed the mortgage modification program as poorly planned and ineffective. The goal of permanently modifying 3 million to 4 million mortgages would not be met, he said.
In prepared testimony, Allison defended the program while noting that changes were still being made to make it more effective.
“The administration has made substantial progress in implementation and has seen initial signs of housing stability, but a number of critical challenges remain,” he said.
Allison said the program was on track to have at least trial modifications offered to 3 million to 4 million people by the end of 2012. But Barofsky and others said the administration was changing the goal of the program to make it seem more effective.
What a joke this program is. While we were underemployed and in danger of losing our home, we applied to our lender in March of 2009. We were told that the program would not be in place until April. When we were finally allowed to fill out the reams of paperwork in May, we hoped we would be hearing something within thirty days. HA! Phone call after phone call was met with dodges, runarounds, different stories, transfer of departments handling the modifications, and always a different representative with a new line of BS. Then, when I lost my part time position, we were told we were required to update our information. Then more delays throughout the summer. Finally, in September, after applying for two part time jobs, I called again. I was finally told, confidentially, that I did not qualify for modification if I had no source of income, and if I got the two jobs, I would be over the threshold of income to be considered. Luckily the two jobs came through, and we were able to refinance at a very low interest rate. Our broker told us how lucky we were that we didn’t go for the modification. It would have destroyed our credit rating, and probably would not have been as attractive as the re-fi. It’s sad how these charlatans prey on the hopes and fears of honest, hard-working people who have fallen through the gaping holes opened by the appraisers, lenders, speculators and possibly well-meaning but idiotic legislators. Be very afraid.
There is nothing easy about this modification plan. A small neighborhood bank claimed they could not do this. I know someone who is on workman’s comp, late on his mortgage and I mentioned the plan to him. The PLAN says to contact your mortgage company and they will start the process. Well, his small bank claims they don’t offer the plan, but offered to re-finance for him.?????
The Government can say one thing, but the businesses are not tuned-in.
Who cares about credit scores dropping. The Obama administration is encouraging people to miss mortgage payments, because it’s the only way some homeowners can get help. We bought our house in 2007, before the bubble burst and when interest rates were higher, and our value dropped so quickly we now cannot refinance, can’t sell, can’t do anything, because we make all our payments but have no equity anymore. Maybe we’d be better off defaulting on purpose. We’re never going to be able to move again with the housing market and economy, so who cares if our credit scores drop? Car loans? Not getting a new car anytime soon. Gotta’ love a president who only wants to help the poor and totally ignores a majority of Americans. Empty promises.
The mortgage program is a sham. The banks are only milking desperate people to squeeze $ until they can slip the foreclosure notice on them. I just got my denial on Friday after being strung along since last April by CHASE BANK. Now the bank wants me to come up with $12,000.00 without crediting the reduced payments I made when I was told to do so.
I don’t blame Obama. He’s not a banker. The banks are to blame as well as the Fed.
They lobbied and won the right to make bad loans, bundle them as AAA rated securities to sell, and then hedge their loans to protect their interests, and then get the government to bail them out with taxpayer money.
And then rewarded themselves with nice, big fat bonuses !
I tried the modification program, got a great deal just over 4% but I had to subordinate the second loan I had on the home. This bank would only let me subordinate if I agreed to a new loan of 5 years and 8.75% versus my current loan of 15 years and 8%. I am walking away, Yes it will hurt my credit and I will have to pay cash for everything, but I will have a boat load of cash by the time I foreclose and I will be in a better space.
If I don’t have a job and my unemployment only covers utilities, food and car payment and insurance, how is modifying my mortgage going to help? Barry needs to get a clue, people need jobs to be able to pay mortgages in the first place.
Is there any way you can contact George and Cynthia Anthony in Orlando,FL. regarding this. They’re about to lose their home and haven’t paid since last June, I believe–they are Casey Anthony’s parents and need to know about this. Their regular attorney, Brad Conway, could contact their real estate attorney, whose name I don’t recall, maybe if you contacted him.
I’m sure they would be more than appreciative!!
In Christ Jesus,
Nellie Austin
nrha37@yahoo.com