Feds to Alter Mortgage Modification Plans
Source: Los Angeles Times
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 prescreen 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-Vista) was more blunt. He said the program had been a failure and actually 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, the 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, Barosfky’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.
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My Take: I have heard so many horror stories from homeowners who say they have waited six, seven even 10 months to hear about a decision on whether or not they qualify for a modification on their mortgages. Many of these people are on trial periods already and are making reduced payments while waiting for a final modification decision. What they don’t know is that the difference between the original loan amount and the reduced trial period payments has to be repaid somehow. If the loan is approved for a modification, it will get re-worked into the new loan. If not, the homeowner can expect a big, huge balloon payment and that’s not helping them at all.
There are people out there with Louisville KY home loans, for example, who are more underwater now with what they own on the difference between their trial period payments and the regular payments than they were when they signed up for a trial period modification in the first place. If they could have afforded to get themselves into a more comfortable KY refinancing program, they would never have relied upon the government’s trial period to begin with. But for now, they are biting their nails and just waiting.
Meanwhile there are other homeowners out there having to sell junk cars and home office furniture in garage sales just to buy groceries. Others are working part time selling office supplies while holding down full time jobs in sales somewhere else, while gas, food, clothing and basic necessities for everyday living are getting more and more expensive. It seems to me that if the government really wanted to help these struggling homeowners out they would at least agree to cover the trial period payment differences and let these people start fresh with new loan. And, they would hire more people to assist these loan servicers so that paperwork is handled more efficiently and the trial periods themselves don’t have to drag on for months and even years.
By the way, if you’re looking to junk a car for cash, you can now go right to your internet. Today you can sell any car for cash, not just clunkers or junkers.
The companies out there will not only pay you for your junk car, they will also come and pick it up and tow it away for you This is a great way to make money, give to a charity and get rid of that old clunker all in one fell swoop. Sure, kids like getting model trains and other toys and these are the things that charitible groups will get for them with the help of a donated car. They can also buy them things likd hobby tools for putting together models and craftss, as well as clothing and beds and strollers.
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