Homeowner's Blog

Mortgage Loan Modifications Going Slow

A Congressional Oversight Panel recently concluded that the Obama administration's Home Affordable Modification Program (HAMP) is not going to be able to address many troubled mortgages. The program was not designed to address foreclosures caused by unemployment, and many borrowers also have loans that aren't eligible for the program. requirements. Even if it meets its goal of making 25,000 to 30,000 loan modifications each week, half of expected foreclosures won't be addressed. Many of the HAMP modifications are unsuccessful because lenders are not making modifications that are affordable to borrowers.

The Panel missed a possible fourth fundamental weaknesses in the HAMP program - fraud. A government witness at a recent House Financial Services Committee hearing testified that some mortgage modifications scored as HAMP loan mods  were really normal refinancings of healthy mortgages. The lenders motivation for doing so would be to get the government to pay for the administrative costs  (they are subsidized by HAMP) and earn points with the Obama administration for "doing the right thing". Both Congress and the Congressional Oversight Panel should investigate this allegation because it would have a significant impact on the actual success of the program.

The lack of support for HAMP by the lender community suggests that the best alternative is to let independent third parties decide whether it is in the interest of the lenders' stockholders  to rework troubled mortgages. This is a traditional and appropriate job for bankruptcy judges, and Congress should enact bankruptcy reform legislation to empower them to do so. 

Lets Support Legislation to Reform Mortgage Lending

Congress will hold a hearing tomorrow on legislation to reform mortgage lending. The Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728) deserves our support! This bill is an important component of mortgage finance reform. Along with bankruptcy reform legislation, it will prevent the future destruction of the savings, investments and home equity of American homeowners. The Act would:

Continue reading Lets Support Legislation to Reform Mortgage Lending.

"Making Home Affordable" Program Will Help Homeowners

President Obama announced the "Making Home Affordable" program on Wednesday, March 4, 2009. It will contribute to the housing recovery, but won't be a panacea because of its numerous restrictions. According to an analysis by Zillow, a real estate website, about 25% of homeowners nationwide will be eligible. Any step forward is a good step, so we should welcome it and also understand that more steps will likely be needed.
 
The program has two parts. The Home Affordable Refinance program will enable those who have an existing mortgage owned by Fannie Mae or Freddie Mac to refinance at lower rates. The Home Affordable Modification program provides incentives to lenders to help at-risk homeowners avoid foreclosure by reducing monthly mortgage payments.  Homeowners can go to FinancialStability.gov to find out if they are eligible, and monitor the site to keep up with details as they become available.

Other parts of the housing crisis solution, such as federal bankruptcy reform legislation, are also in process. We are also optimistic that the Administration and Congress will be willing to take additional steps if they are needed.