What Grade Would You Give the Government Foreclosure Aid Programs?
If you want to give a grade to the Government Foreclosure Aid Programs, then pick a letter, any letter, between E and G. If you came up with ‘F’, then you’re probably accurate on your grading scale. In all, over $46 billion was set aside to help distressed homeowners through these tough economic times. After all, these homeowners are tax payers, and tax payers gave out $800B to the banks to help them. Why not help themselves too? Well, these programs were not intended to assist homeowner as much as they were to appease tax payers for their sacrifices to the banks. Here’s a scary scorecard of Government Foreclosure Aid Programs. You won’t believe how ineffective these programs were.
Government Foreclosure Aid Programs | Home Affordable Modification Program (HAMP)
Budget: $19 billion; Launched: 2009
Goal: Modify 3 million to 4 million home loans so borrowers could afford them.
Results: 883,076 permanent loan modifications as of Oct. 31. Homeowners save a median of 37% each month.
Shortcomings: Success rate lower than hoped; mortgage companies have not aggressively pursued HAMP modifications. Instead, they do nearly twice as many modifications outside of HAMP. Those are more likely to fail, government data show, keeping borrowers at risk of foreclosure.
Government Foreclosure Aid Programs | FHA Short Refinance
Launched: 2010, with a $2.7 billion program to modify second liens.
Goal: Help 500,000 to 1.5 million homeowners refinance to lower-interest FHA loans.
Results: 334 refinances through September.
Shortcomings: Loan owner must forgive at least 10% of the mortgage. Lenders don’t generally forgive principal and especially not on loans on which borrowers are current.
Government Foreclosure Aid Programs | Hardest Hit Fund
Announced: 2010
Goal: Help 500,000 unemployed or underemployed people in 18 states and the District of Columbia avoid foreclosure. Loans typically made for six to 24 months and will be forgiven if borrowers fulfill requirements.
Results: 18,946 homeowners helped through September.
Shortcomings: Start took longer than expected. Just $113 million provided to homeowners through September.
Government Foreclosure Aid Programs | Emergency Homeowners Loan Program (EHLP)
Announced: 2010
Goal: Make loans to 30,000 homeowners facing foreclosure because of lost jobs or reduced income in 32 states and Puerto Rico. Loans can be forgiven if borrowers meet requirements.
Results: Fewer than 12,000 homeowners made it through the application process in time, preliminary data show. More than half of the $1 billion went back to Treasury because it wasn’t allocated to homeowners in time.
Shortcomings: Organizational delays pushed launch into 2011, and eligibility requirements disqualified many.
Government Foreclosure Aid Programs | Home Affordable Foreclosure Alternatives (HAFA)
Launched: 2010
Goal: Encourage short sales and deeds-in-lieu instead of foreclosure. A short sale is when a loan owner sells a home for less than what is owed. Deed-in-lieu is when homeowners return deed to lender.
Results: 20,701 completed through October. Mostly short sales.
Shortcomings: Servicers may collect more money doing short sales outside the government program, and they do more outside the government program, according to an October government report.
Government Foreclosure Aid Programs | Second Lien Modification Program (2MP)
Launched: 2010
Goal: Get second liens modified or extinguished if first liens are modified via HAMP. Treasury has estimated that up to 50% of mortgages at risk are backed by second liens. Second lien holders can block loan modifications.
Results: 50,434 modifications started through October.
Shortcomings: Program started slowly, in part because industry lacked good data to match borrowers’ first liens with second liens, the Government Accountability Office reported in March. Mortgage servicers said there were differences in spelling of addresses, for instance, that prevented accurate identification.
Government Foreclosure Aid Programs | Principal Reduction Alternative (PRA)
Launched: 2010
Goal: Encourage mortgage owners to forgive principal with a HAMP modification.
Results: 53,323 trial modifications started through October.
Shortcomings: Mortgage servicers don’t have to offer borrowers a principal reduction even if calculations show that doing so would result in better returns to the loan owner.
Government Foreclosure Aid Programs | Home Affordable Refinance Program (HARP)
Announced: 2009.
Goal: Refinance 4 million to 5 million home loans with mortgages backed or owned byFannie Mae or Freddie Mac to lower interest rates.
Results: 928,570 through September.
Shortcomings: Program initially didn’t adequately reduce risks to lenders and others to refinance homeowners with little or no home equity. Changes announced in October may double number of HARP refis.
Homeowners cannot rely on the government to assist them during this tough economy. The government is not equipped to solve problems of this magnitude. Only entrepreneurs and real estate professionals with the knowledge to sell ‘unsellable’ houses to ‘unloanable’ people will be able to stabilize the housing market. You get rich in down economies by solving problems, and the bigger the problem, the more money you make. The solution to the troubled housing market, known as the Assignment of Mortgage Payments System, is the only way that distressed homeowners will be able to sell their houses in this economy and move on with their lives.
If you liked ‘Scorecard of Government Foreclosure Aid Programs’, then you may also enjoy other articles written by Phill Grove, the REIMaverick.
