The Congressional Oversight Panel recently released a 216 page report criticizing the Federal loan modification program as being “not effective enough”.
It was supposed to forestall America’s accelerating foreclosure, but right now just about everybody knows that this is not happening.
The Panel’s report also had harsh words for the Treasury Department, which is supposed to kick-start the program and bring help to American householders who are in danger of ending up in the street. Because the administration had not done enough, the foreclosure crisis had continued unabated, the report concluded.
The Congressional Oversight Panel was put in place to keep an eye on activities surrounding financial bail-outs and related initiatives. “It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble,” the Panel report concluded laconically.
Obama’s Making Homes Affordable program (otherwise known as HAMP) was introduced in March 2009 with great fanfare to assist households where the primary wage-earner was either unemployed with a second lien to service, or sinking underwater – estate agent speak for a situation where the outstanding loan exceeds the current value of the property.
Nobody actually said how many borrowers would actually be helped at the time. Now at least the Congressional Panel has come clean with a comment that, at best, just one million American home owners could expect to receive aid.
According to the Treasury Department, by last month approximately 230,000 households had been assisted, with a further 781,000 passing through the trial modification phase.
This didn’t exactly bring the Congressional Oversight Panel out in praise. Their report noted that, even among borrowers who receive five year modifications, some will fall again and face foreclosure for a second time. “In the final reckoning,” the panel notes, “the goal of HAMP falls miserably short of the 4 million American householders it was supposed to assist”.
The Treasury Department argues that it was never the intention to help everybody – right from the beginning borrowers had to be in good standing with their payments before they even had a look-in. The Department seems to be overlooking the fact that many delinquent borrowers are facing a problem not of their own making – it was not they who shook the pillars of Wall Street, but the major tenants thereof.
It’s a vicious circle. Foreclosures are still on the rise, every foreclosure drives prices further down, and every price fall vacuums in more underwater borrowers.
Treasury Secretary Timothy Geitner isn’t mincing his words these days. “It’s going to be a painful process for many Americans,” he told me. “But we’re going to do what we can to deliver to as many people as we can reach.”
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