Mortgage-Aid Plan Gets Tepid Results

[question everything]

Source: WSJ

Just 12% of eligible borrowers have started trial loan modifications under the Obama administration's $75 billion mortgage foreclosure prevention plan, according to a Treasury report released Wednesday. The latest data come amid increasing concern that the effort, which relies on hefty government incentives for lenders and borrowers, won't be enough to effectively combat mounting foreclosures across the country.

Under the program, eligible borrowers who are behind on their mortgage payments or are at risk of imminent default can get their payments reduced during a trial period. Borrowers must typically be current on their payments in the trial program after three months and meet documentation requirements to qualify for a reworked mortgage. There are growing questions about how many borrowers who receive trial modifications will ultimately get their loans reworked.

The administration, which announced the program in February, has said it expects as many as four million borrowers to begin trial modifications. So far, more than 570,000 trial modifications have been offered to borrowers under the program and about 360,000 trial modifications are under way, the Treasury reported. Nearly one in 12 borrowers are at least 90 days past due on their mortgage or are in foreclosure, the Mortgage Bankers Association reported last month. Among large mortgage servicers, Wells Fargo & Co. and Bank of America Corp. have started trial modifications for 11% and 7%, respectively, of their eligible borrowers who are at least 60 days past due. J.P. Morgan Chase & Co. has started trial modifications for 25% of eligible borrowers, and Citigroup Inc. 23%.

In an interview Wednesday, Assistant Treasury Secretary Michael Barr called the program "highly effective" and predicted it will meet its goals. But in a congressional hearing Wednesday, House Financial Services Chairman Barney Frank (D., Mass.) said he is disappointed at the pace of the program. He threatened to revive a measure to allow bankruptcy judges to rework the terms of troubled mortgages if servicers didn't improve their efforts.. Some borrowers aren't providing the required information or their documents don't match the information provided verbally, said Michael Brauneis, director of regulatory risk consulting at Protiviti Inc. Some borrowers complain that mortgage companies often misplace documents they send in.



Read more: http://online.wsj.com/article/SB125250943110595845.html

[WriteDown]

1. So many reasons this failed...

The biggest one being that its hard to create a low enough payment when a homeowner has zero income from lack of a job.

[jasi2006]

11. The major reason being the dirty little secret of how the Fed really

works with mortgage lenders. I was soundly ridiculed and criticized for mentioning this before. But really folks, the lenders have already received their payment in full for your mortgage plus the interest from the Fed so foreclosures really cost them nothing. They would rather not negotiate because they don't have to and they lose nothing in the deal, they still make money and will sell the foreclosed property and make more money when the economy rebounds.

[mac56]

2. Maybe they should allow people to rework their mortgages

BEFORE they're at an imminent default status, huh?

[The Hope Mobile]

4. Agreed

[The Hope Mobile]

3. I've heard of several people who have done it, saved significant $

and it has kept them in their homes. I agree it should be moving faster but I'm thankful for every case where people are allowed to stay in their home and re-start their payments at a better/more reasonable rate.

[Missy Vixen]

5. Here's our experience

We applied for the program in March. We got approved two weeks ago, after receiving a letter from our lender stating they'd lost our paperwork. The paperwork was miraculously found when we called in and waited on hold with three different people for over an hour.

The first person we spoke with started asking questions such as "how much are your cable and cell phone bills monthly?", and contradicted herself several times in a five-minute conversation. I asked to speak with someone else. The second person took our information, told us we were approved and what our conditional payment was, and the third person just got done talking with us about the trial-period payments, etcetera.

The additional "Making Home Affordable" paperwork arrived via FedEx about a week later. We're filling it out now.

The biggest problem with this program is that there was no penalties for lenders that refused to cooperate. Also, the people who are posting that it's tough to pay a mortgage with no money coming in? Absolutely.

We realize how lucky we are. :scared:

[PSPS]

6. The reason this was doomed to fail is because people bought more than they could afford

Even if you charge zero interest, the PITI payments on that $750K McMansion would be far beyond the reach of the guy who makes $30K/year and took out a no-doc loan with a payment option that allowed negative-amortization of no payment at all.

This was a silly plan from the beginning. The only way to make these loans "affordable" is to stretch out the payments so it becomes a 50 or 60-year loan. And that's ridiculous because the "buyer" will never have any equity or realize any profit if they sell. In other words, they would be paying a mortgage payment but only realize the benefits of renting.

[The Hope Mobile]

7. I'm sure that was the case for some but definitely not all.

From the ones we know of, the wife lost her job and the husband's hours were cut back.
Another one had a rental property that they couldn't rent when the economy went bad and eventually had to foreclose on it which meant that it looked to the IRS like they had capital gains when they really didn't . . . which put their primary residence at risk because of the additional taxes and loss of rental income.
Another was medical problems.
None of these people were irresponsible, just caught in bad situations.

[Javaman]

8. That's a really tired canard...

the point of it being all about "buying more than they could afford" has long since past.

Just look at the layoffs and unemployment. Did you ever think that many of the people lost their houses because they also lost their jobs?

give it a rest. Instead of complaining, try coming up with a solution, huh?

so freaking exhausting.

[Frosty cupcake]

9. Americans have long been a blame the victim nation.

Goes all the way back to John Winthrop and his American Exceptionalism, Shining City on the Hill ideal. God graces us because we are so devout (morally superior), therefore my happy situation is clearly the result of my moral superiority (hard work, smarts), no?

The inverse of that is the "the poor get exactly what they deserve" because they are immoral (lazy, stupid, what have you).

Hence the tired parroting of "well, they just bought more house than they could keep." Makes us all feel so much better about our own situations. I still have my house, so obviously I am just a better person than that unlucky bastard who lost their home due to a job loss/ medical bill induced bankruptcy/etc.

[Javaman]

10. Thanks for the historical reference. :)

Cheers and welcome to DU.

The flip side of the argument that also get me is: Well, we shouldn't have helped anyone, especially the wall street gang.

That's fine, but then what is accomplished by not helping anyone?

I was on the side of the home owners. Logic dictated to me, that if we only bail out wall street, then nothing is solved.

I had proposed a few years ago, this solution: set up the mortgages to be reset to the original offering percentage, freeze them there. Set down or reenact the various regulations on the mortgage industry.

The bleeding would have stopped, the banks would have still made money, just not as much as they wanted(so what else is new), the home owner gets to keep their homes. Everyone is happy.

I got shot down left and right like I was some sort of crazy nut wanting to help "the morons that bought too much, didn't have enough to begin with, blah blah blah".

Yes, there were idiots out there, but the percentage of those types were incredibly small as compared to the people that were conned into liar loans and sharks falsifying records for their mortgage commission.

Now, that has been completely eclipsed by rampant unemployment.

I'm certainly no psychic as to whether or not my idea would have worked, but it certainly would have slowed things down to the point were either a better idea could be found or at least enough time to employ other options.

Meh, here we are.

[Betty]

12. I tried to get considered for this program

and the assholes at Bank of america said that I didn't qualify. No explanation. I pay close to half of my income on the mortgage (am self employed and my income has dropped precipitously since I got the house five years ago). There is no requirement that the banks actually help anyone... even though they have siphoned off billions of our tax dollars, and B of A is one example of that. I fear that the same thing will happen with the health insurance reform if there is no public option (which I am pretty sure is going to be the case). There will be nothing to compel the insurance companies to do the right thing... so they won't. This idea that somehow big business is going to treat people fairly without any government intervention is pure bullshit and these politicians know that very well. Which is why they will make sure that there is no government intervention. Let's not forget who's really running this country.