Administration plans new efforts on foreclosures

[BobMango]

November 28, 2009

The Obama administration, battling a foreclosure crisis that shows no signs of relenting, will step up pressure on mortgage companies to do more to help people remain in their homes, officials said Saturday.

The administration will announce its expanded program on Monday, Treasury spokeswoman Meg Reilly said.

"We are taking additional steps to enhance servicer transparency and accountability," Reilly said. She said the goal was to increase the rate that troubled home loans were converted into new loans with lower monthly payments.

Industry officials said the new effort would include increased pressure on mortgage companies to accelerate loan modifications by highlighting firms that are lagging in that area.

The Treasury is also expected to announce that it will wait until the loan modifications are permanent before paying cash incentives to mortgage companies that lower loan payments.

Under the $75 billion Treasury program, companies that agree to lower payments for troubled borrowers collect $1,000 initially from the government for each loan, followed by $1,000 annually for up to three years.

The government support, which is provided from the $700 billion financial bailout program, is aimed at providing cash incentives for mortgage providers to accept smaller mortgage payments rather than foreclosing on homes.

The program has come under heavy criticism for failing to do enough to attack a tidal wave of foreclosures. Analysts said the foreclosure crisis is likely to persist well into next year as high unemployment pushes more people out of their homes.

Rising foreclosures depress home prices and threaten the sustainability of the fledgling economic recovery.

A report last week from the Mortgage Bankers Association found that 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter.

The Congressional Oversight Panel, a committee that monitors spending under Treasury's bailout program, concluded in a report last month that foreclosures are now threatening families who took out conventional, fixed-rate mortgages and put down payments of 10 to 20 percent on homes that would have been within their means in a normal market.

Treasury's program, known as the Home Affordable Modification Program, "is targeted at the housing crisis as it existed six months ago, rather than as it exists right now," the report said.

Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, said the industry supported many of the changes Treasury was proposing.

But he said the foreclosure problem, which began with heavy defaults on subprime mortgages, was expanding to more traditional types of mortgages because of unemployment which has now hit a 26-year high of 10.2 percent.

"The subprime problem has regrettably morphed into an unemployment problem," Talbott said. He said there was no government program to help the unemployed who are in danger of losing their homes but "many private lenders are modifying loans for the unemployed on their own."

Treasury's Reilly said the expanded program would, among other steps, make more aid available to struggling borrowers and expand the number of organizations providing help.

Source:?Yahoo News
http://news.yahoo.com/s/ap/20091129/...e_foreclosures

[DeadManCrawling]

The beginning of the end, and the first government admission that this problem is beyond its (or anyone's) control.

Now the lenders are blaming unemployment. Well, what caused unemployment? In large part, the housing crash.

The snake begins to devour its tail.

Hope you have backup plans, no one in power does.

Good luck,

-dmc

[andy158]

Observe the domino effect. The banking rollercoaster is still lacking control. Along with unemployment, worthless dollar and record deficits the government will take the worst beating for they are the biggest contributors in destroying the very base of their tax money.

[nc73]

In all fairness, no one deserves to have their loans modified. They got into this mess, let them find a way out. What is so wrong with foreclosures? If they didn't pay for whatever reason, it's time to give the home back to the banks. Let them do what they want with it. It is NOT your home until you pay it off. The government has no business bailing anyone out, especially the banks.

[BobMango]

In all fairness, no one deserves to have their loans modified. They got into this mess, let them find a way out. What is so wrong with foreclosures? If they didn't pay for whatever reason, it's time to give the home back to the banks. Let them do what they want with it. It is NOT your home until you pay it off. The government has no business bailing anyone out, especially the banks.

While I agree with you on the principal of no bailouts in general, the fact of the matter is that the banks that took Federal bailout funds under TARP are required to lower monthly payments for borrowers in imminent danger of foreclosure. They aren't doing it. Of the more than 650,994 loan revisions that had been started through October, none of the trial modifications had been converted to permanent repayment plans according to the Treasury department.

The banks took the money with the understanding that they would provide assistance to borrowers that were in trouble. Instead they have continued business as usual, ignoring the log in their eyes, while focusing on the mote in their cutomers' eyes.

[LimpDisc]

In all fairness, no one deserves to have their loans modified. They got into this mess, let them find a way out. What is so wrong with foreclosures? If they didn't pay for whatever reason, it's time to give the home back to the banks. Let them do what they want with it. It is NOT your home until you pay it off. The government has no business bailing anyone out, especially the banks.

Ever live next to a foreclosure? I'd rather they had their loan modified instead of living next to a total crap hole for a few months.

[justbroke]

The banks took the money with the understanding that they would provide assistance to borrowers that were in trouble.

Umm... show me where TARP indicated that? That is just not true. TARP, which stands for Troubled-Assets Relief Program was for the Treasury to buy the actual Notes from the Banks and to hold them. That never happened. The money was just given to the banks to make them solvent. There were no strings attached.

Even if TARP was actually used to buy troubled assets, that in no way was direct help for any homeowner.

In all fairness, no one deserves to have their loans modified. They got into this mess, let them find a way out. What is so wrong with foreclosures? If they didn't pay for whatever reason, it's time to give the home back to the banks. Let them do what they want with it. It is NOT your home until you pay it off. The government has no business bailing anyone out, especially the banks.

At this stage in the economic crisis, it's just not so simple as saying "no one deserves" it. Until your next door to a home that just sold for 50% of what you paid 2 years ago, and that house that just sold for 50% of yours, paid 20% more than you did those 2 years ago... it's just not that simple.

Much of the American wealth over the past 10 years has been in real estate. The Government has no choice, really, but to increase taxes and to decrease the size of Government. Two things that they have refused to do so far. Don't let the healthcare smokescreen fool you. (I agree on fixing healthcare, but I am strong on single payer, which they won't do because Congress get hundreds of millions in campaign contributions from... yep... healthcare industry! Obama received millions himself as a Senator.) Check out the $11M Obama received from healthcare companies in 2008, but yet this year, mysteriously, he returned the only $12K they pushed his way... same with Biden and Baccus.

This problem doesn't stop here just at foreclosures... the problem is systemic. Without a tax base, a lot of public service goes away. This is absolutely the key to keeping people in the homes. It's not enough just that the banks own the homes and are paying taxes... because the more property tax the banks pay out, the less revenue they get taxed on.

This cyclic problem then extends further when the communities that include significant foreclosures, start to crumble, literally. The infrastructure starts going first, then schools, stores, and other employment. Regardless of whether we think we're getting too socialistic, our roots are still capitalistic, and we can't just quit cold turkey! Our choice is to be the #1 superpower, or to just let it all slip and become China's #1 customer. Oops, we already are China's #1 importer.

To sum it up... yes, the Treasury and Congress need to attempt to buy our way out of this problem. Will it work? On its face, it appears that it should work, but what we have now is a jobless recovery. Further erosion of the housing base will keep it a jobless recovery and there is just no spring back from that.

I know no one wants to hear this, but it could be 5-10 years, easily, if this trend continues another 6 months. Now, I'm no analyst or economist, but that's my view from where I'm sitting... bankrupt!

[HHM]

Good analysis.

Like all bubbles, they burst. And that is what we have here. Its just that this bubble affected "main street". Justbroke is right, the bulk of spending from about 2000-2007 was fueled by rising real estate prices, people refi'ng to pull out equity and spending that equity, and banks going along for the ride telling people, "don't worry about this adjustable rate mortgage, we are putting $50K in your pocket, and besides, you can refi in 2 years". Well, 2 years came, and now everyone got bit.

No one want's to say it, but it will be a LONG TIME before we get back to break even. There is a shadow inventory of houses where foreclosure hasn't even started (1.4MM), and with 10% unemployment, there are simply not enough people with stable enough financial circumstances to buy the inventory. A realtor in my state recently mentioned to me that based on average time on market, there is a 7 year back log of houses for houses worth over $1MM already on the market. Of course, my remark back is; those houses won't be worth $1MM in about 6 months

The government really needs to green light senate bill S.B. 61 to allow modification of primary residence first mortgages in chapter 13 bankruptcy. That doesn't cost the government money, it at least keeps monthly payments coming into the banks, and the homeowner can stay in their home.

[DeadManCrawling]

JB and HHM,

Keen analyses both. I would add one observation.

Foreclosure rates are TOO dependent on a stigma that is fast disappearing as people realize that their equity will not recover for a decade or two.

A couple recent studies, over the summer, have downright depressing forecasts about the tipping points for people to default strategically. Over 100k, most people (higher than 50% I think), are considering default. Even id they COULD stay, financially. At 200k lost, the number goes a little higher.

The most frightening thing, perhaps, is this: When people personally know someone who defaulted, they are EIGHTY-FIVE percent more likely to do so themselves. Almost like they need someone to do it first to relieve the embarassment. If that is true, others in our neighborhood are about to get the go-ahead from us.

Perhaps it is justified, perhaps not. No moral quibbles here, just the observation.

[justbroke]

No one want's to say it, but it will be a LONG TIME before we get back to break even.

I think we both just did.

[BobMango]

Umm... show me where TARP indicated that? That is just not true. TARP, which stands for Troubled-Assets Relief Program was for the Treasury to buy the actual Notes from the Banks and to hold them. That never happened. The money was just given to the banks to make them solvent. There were no strings attached.

I beg to differ. TARP funds are being used for mortgage modification under HAMP. Financial institutions volunteer to join the HAM program. If they took TARP funds they automatically "volunteered."

Check this link http://www.mortgagelawnetwork.com/20...-be-suspended/

And this link to the GAO clearly states that TARP funds are being used for HAMP. http://www.gao.gov/products/GAO-09-837

This is one reason so many banks wanted to give the TARP funds back, once they figured out what strings were attached it was generally too late.

[banca rotta]

In all fairness, no one deserves to have their loans modified. They got into this mess, let them find a way out. What is so wrong with foreclosures? If they didn't pay for whatever reason, it's time to give the home back to the banks. Let them do what they want with it. It is NOT your home until you pay it off. The government has no business bailing anyone out, especially the banks.

I agree! I mentioned this on the other post about the "lotto winner" that won the free house.

Just because one goes back into an apartment this isn't the end of the world. It's not easy but it's not the end.

Keep creating bailouts and you will see the end.

[justbroke]

I beg to differ. TARP funds are being used for mortgage modification under HAMP. Financial institutions volunteer to join the HAM program. If they took TARP funds they automatically "volunteered."

I was talking about the original plan for what the TARP money was and what the original $350Bn issued under TARP I was all about. Also, TARP funds are not being used specifically for modifications. The Treasury is providing a $1,000 incentive (with additional $1K incentive for years one and two of modification), for servicers that do modify the loans. Most of these servicers are just doing trial modifications. The actual TARP funds are not used for modifications. If TARP funds were actually being used to support the mortgages, then TARP would be exactly what it was originally supposed to be, and it is not.

If you actually read the original TARP report from the CBO on January 1, 2009, you'll clearly not see any mention of HAMP in there, as HAMP wasn't even a bill at that point. You can't attach the "strings" after the fact. As for the second installment of TARP some strings were added. While those strings are there, you have got to be kidding me that this is working and that TARP is helping with foreclosures! The HAMP program is a very specific TARP sub-component with $75Bn in it. There are no strings to the other TARP money, which is what I stated earlier.

TARP was signed in October, 2008 as part of the 2008, the Emergency Economic Stabilization Act of 2008 (EESA). That Act, from which TARP was born, authorized the Department of the Treasury to purchase or insure up to $700 billion of troubled assets. There is nothing in that bill around anything other than purchasing the bad loans and holding them until later for resale (or at best, guaranteeing them).

What I was talking about was what TARP was, and is. TARP was practically never used for the purpose that Geitner and Company went to Congress and begged for! This is the disdain I have for TARP.

The plan was never to just give it to the banks and have them modify mortgages. The actual plan, in the legislation, was for the Treasury to hold the notes and any notes purchased under TARP would then have the ability to be modified. (Much of the problems with modifications was and continues to be these asset-backed, or securitized, mortgages that the investors seems disinterested in modifying.)

TARP doesn't even, in the preamble or purposes section (Section 2), mention foreclosure or modification at all. It speaks specifically to liquidity and stability of the financial system.

And even then, in Section 109 of TARP, and to which HHM referred to as the ability for Judges to modify mortgages in Chapter 13, was gutted and has absolutely no teeth. That section only gives the authority of the Treasure to "encourage" servicers and mortgage holders to modify loans.

• 6 Number of times the word "foreclosure" is used.
• 18 Number of times the word "stability" is used.
• >100 Number of times the words "troubled assets" is used.

I'll leave you with the specific text in Section 109 of TARP...

... the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.

TARP is the wool pulled over the taxpayer's eyes!

[banca rotta]

While I agree with you on the principal of no bailouts in general, the fact of the matter is that the banks that took Federal bailout funds under TARP are required to lower monthly payments for borrowers in imminent danger of foreclosure. They aren't doing it. Of the more than 650,994 loan revisions that had been started through October, none of the trial modifications had been converted to permanent repayment plans according to the Treasury department.

The banks took the money with the understanding that they would provide assistance to borrowers that were in trouble. Instead they have continued business as usual, ignoring the log in their eyes, while focusing on the mote in their cutomers' eyes.

Bush said Iraq has WMD's, Clinton said "he not not have sex with that woman", You get the point.

TARP was a bailout created to prop up the banks which would have collapsed (too bad). It wasn't there to help mortgage payers.

Our "leaders" did it to us again. I really pitty any of you that believe that they took TARP money to "help us".

Since the problem runs in the trillions it will be a decade at least before this crisis is over.

I regret saying this but they must let everything fail and fall and let the markets correct this naturally. The bailouts will destroy us with debt unlike anything we have ever seen.

America will have it's 341 meeting at the UN with all of our creditors behind the Chinese "trustee" digging through it's non exempt assets for liquidation. Our labor will also be an asset to our creditors.

Don't think it cannot happen.

[banca rotta]

Good analysis.


No one want's to say it, but it will be a LONG TIME before we get back to break even. There is a shadow inventory of houses where foreclosure hasn't even started (1.4MM), and with 10% unemployment, there are simply not enough people with stable enough financial circumstances to buy the inventory. A realtor in my state recently mentioned to me that based on average time on market, there is a 7 year back log of houses for houses worth over $1MM already on the market. Of course, my remark back is; those houses won't be worth $1MM in about 6 months

The government really needs to green light senate bill S.B. 61 to allow modification of primary residence first mortgages in chapter 13 bankruptcy. That doesn't cost the government money, it at least keeps monthly payments coming into the banks, and the homeowner can stay in their home.

I do agree with the chapter 13 mortgage modification. If only congress would do the right thing and stop sleeping with the bankers.

The unemployment rate is over 20% not 10%. During the Great Depression it was 25% and that included so called "discouraged workers" that stopped looking and the higher paid professional that is flipping burgers for min wage.

This is just another scam that the govt changed the statistics to make things look better then they really are.

If they advertised it at 20% national, then we will get 100% voter turn out from now on and every member of congress will be removed from office.