Foreclosure Prevention Program, Fixer Upper Or Turn Key Ready?

On Thursday the House Committee on Oversight and Government Reform examined the impact of the Treasury’s foreclosure prevention efforts.  The hearing, “Foreclosure Prevention: Is the Home Affordable Modification Program Preserving Homeownership?”, devoted the majority of time to the Home Affordable Modification Program (HAMP).

The Home Affordable Modification Program (HAMP) has been under fire since being created by the Financial Stability Act of 2009.  Most believe the program lacked any real assistance to homeowners.  The changes proposed may help in some ways but some fear it will further the recovery efforts, possibly increasing the time until a full recovery can be realized.

The changes are part of the supplemental directive 10-02.  Assistant Secretary for Financial Stability Herbert M. Allison during his testimony outlined some of the key points of the changes proposed.

  • Servicers must determine whether a borrower is eligible for HAMP as soon as two payments have been missed.  If the servicer determines the borrower to be eligible, they must then actively solicit the borrowers to engage in participation of the program.
  • No foreclosure referrals will be accepted from HAMP participating servicers unless, #1 the borrower is not eligible for HAMP. #2 Borrower would not respond to servicer solicitation for the program. #3 Borrower is not interested in participation in the program. #4 Borrower failed to make trial modification payments.
  • Once a borrower is determined to be eligible for the program “Servicers will be required to provide borrowers with clear written communications explaining the concurrent foreclosure/modification processes and stating that a foreclosure sale will not take place during the (30 day) trial period”. Thirty days can make a significant difference for borrowers who need more time to correct any inaccuracies.

Other changes include encouraging borrowers toward alternative programs.  One program encourages banks to modify second liens, which often delay home loan modifications.

Many believe these changes will have little impact on the current housing market or those suffering the financial devastation that losing a home entails.  To date only 200,00 homeowners have received help through HAMP,  while far fewer than the 4 million homeowners projected will ever receive any assistance.

One problem may plague the success of any new changes.  That problem is ‘enforcement’.  Banks, who have paid back bailout funds, voluntarily participate in the program.  Those large banks own or service most of the mortgages in question.  The only power the Treasury has to enforce these rules with banks are fines and penalties.  This is the same power they can currently exert without the changes.  Banks have the option of opting out of the program which would leave them playing by their own rules with their own mortgage programs which seems to lead right back to the same foreclosure freeway we have been on for the last year.

Related posts:

  1. More Foreclosures Imminent
  2. Permanent Loan Modifications Difficult To Achieve
  3. Lenders Resist Making Home Affordable
  4. Report: HAMP Program Only Making A Dent In Foreclosure Crisis
  5. Qualifying For The New Foreclosure Relief Program

Comments

One Response to “Foreclosure Prevention Program, Fixer Upper Or Turn Key Ready?”

  1. Anonymous on March 31st, 2010 10:46 pm

    Terrific work! This is the type of information that should be shared around the web. Shame on the search engines for not positioning this post higher!

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