Thursday, March 17, 2011

Congressional Panel Report Says Foreclosure Mitigation "Largely Failed"

The final report released Wednesday by the Congressional Oversight Panel (COP) paid special attention to foreclosure prevention initiatives, particularly the Home Affordable Modification Program. The COP analyzed several foreclosure mitigation efforts that have been implemented since as far back as 2007, and made it very clear that none of the programs have been as successful as hoped, mainly because of poor planning, poor regulation, and poor data collection.   The report focuses  uses of money under the Troubled Asset Relief Program (TARP) paid special attention to foreclosure mediation programs, particularly the Home Affordable Modification Program (HAMP).

The report says “The TARP is now widely perceived as having restored stability to the financial sector by bailing out Wall Street banks and domestic automotive manufacturers while doing little for the 13.9 million workers who are unemployed, the 2.4 million homeowners who are at immediate risk of foreclosure, or the countless families otherwise struggling to make ends meet.”

After pointing out that the federal government is not an official sponsor of the HOPE NOW alliance, the COP says that while the alliance reports it has modified more than 3 million loans, little information is available about the actual savings the modifications are providing to homeowners.

Of the HOPE for Homeowners program that was established in July 2008, the COP says it “managed to refinance only a handful of loans,” most likely because the program had “poor initial design, lack of flexibility, and … [relied] on voluntary principal write-downs, which lenders were very reluctant to make.”