The following article appeared a few days ago explaining that the foreclosure programs that were put in place were primarily for sub-prime and risky mortgages. However with the bad ecomomy, underwater home values, and continued high unemployment – these programs are outdated. In todays situation – everyone is being affected and some of these programs absolutely need to be scraped or modified to address the needs of all homeowners who have done the right things but can’t survive going forward. This issue needs to be addressed now and stop the finger pointing so less people will lose their homes.
By Andrew Martin
New York Times Published: Sunday, Jun. 5, 2011 – 12:00 am | Page 10A
DELAY-PLAGUED PROGRAMS FIND FEW TAKERS – The Obama administration’s main program to keep distressed homeowners from falling into foreclosure has been aimed at those who took out subprime loans or other risky mortgages. But these days, the primary cause of foreclosures is unemployment. As a result, there is a mismatch between the homeowner program’s design and the country’s economic realities – and a new round of finger-pointing about how best to fix it.
The administration’s housing effort does include programs to help unemployed homeowners, but they have been plagued by delays, dubious benefits and abysmal participation. For example, a Treasury Department effort started in early 2010 allows the jobless to postpone mortgage payments for three months, but the average length of unemployment is now nine months. As of March 31, there were only 7,397 participants.
“So far, I think the public record will show that programs to help unemployed homeowners have not been very successful,” said Jeffrey C. Fuhrer, an executive vice president of the Federal Reserve Bank of Boston.
Data released last week suggest that the administration’s task is only growing more difficult as the problems created by unemployment and housing persist. New job growth in May was anemic, and unemployment inched up to 9.1 percent, the Labor Department reported Friday.
Earlier in the week, a widely watched index found that housing prices had dropped to their lowest level in nearly a decade. And while the rate of homes falling into foreclosure has slowed, the reason is delays in processing foreclosures, not a housing recovery, according to RealtyTrac, a company that tracks foreclosures. There were 219,258 foreclosure filings in April, the latest month available.
As part of the national bank bailout, the Treasury Department was given $46 billion to spend on keeping homeowners in their houses; to date, the agency has spent about $1.85 billion.
Morris A. Davis, a former Federal Reserve economist, estimates that as many as a million homeowners slipped into foreclosure because of insufficient help for the unemployed.
“The money was there and they didn’t spend it,” said Davis, an associate real estate professor at the University of Wisconsin. “I don’t mean to sound outraged, but I am pretty outraged.”
Administration officials said their programs have had a positive impact, albeit not as large as they had hoped. But they say that the problems of unemployment and negative equity on homes are not easily solved. They also say programs to curb foreclosure are voluntary, so they are limited in how far they can push mortgage servicers and investors, who often make more from foreclosures than from offering aid.
President Barack Obama has been scrambling to curb the number of foreclosures ever since he arrived at the White House.
At the start of 2009, the administration announced its primary foreclosure prevention initiative, the Home Affordable Modification Program. It gives incentives to banks to modify mortgages, reducing monthly payments for eligible homeowners.
The administration said the program would help more than 3 million to 4 million homeowners, but so far, only 670,000 homeowners have received permanent modifications. In addition, the program was primarily meant for homeowners with risky mortgages; jobless owners are often ineligible because some payment, albeit reduced, is required.