Lawmakers growing frustrated with mortgage-relief failures
Wednesday, December 9, 2009
Most of the struggling homeowners who have enrolled in the Obama administration's marquee mortgage-relief program still haven't proved they qualify for help, illustrating lingering weakness in the effort to aid distressed borrowers.
About 70 percent of the borrowers who have signed up for the program, called Making Home Affordable, have yet to provide adequate documentation, and many homeowners continue to struggle even after their mortgage payments are lowered, industry and government officials told the House Financial Services Committee on Tuesday.
The slow progress has provoked an angry reaction from lawmakers, who are growing increasingly frustrated with the program, which lowers borrowers' payments to 31 percent of their income.
"All of these banks have got to do better. If you don't do better at some point, you're going to force Congress to take drastic action," said Rep. Al Green (D-Tex.).
J.P. Morgan Chase told the committee that about 29 percent of borrowers it signed up for the program did not make their new, cheaper mortgage payments. Bank of America said that about 65,000 of the borrowers it has helped made initial payments as required, but 50,000 of them have either not submitted all of the required paperwork or show some discrepancy in the information -- putting them at risk of losing the aid.
"Taxpayer-funded foreclosure mitigation programs have been an abject failure," said Rep. Jeb Hensarling (R-Tex.). "Throwing more money at programs that do not work is absolutely insane."
The Obama administration faces growing pressure to adapt the program to help the rising number of unemployed workers falling behind on mortgages. Rep. Barney Frank (D-Mass.), chairman of the committee, said he wants to include $3 billion from the federal Troubled Assets Relief Program for mortgage relief for jobless Americans in a sweeping financial regulatory reform package.
"We have a great frustration at the failure of the combined efforts of elements of the federal government to make a substantial impact on the foreclosure issue," Frank said. "But no one can think we have done a satisfactory job."
The unemployment proposal is similar to a more than 20-year-old Pennsylvania program that offers unemployed workers low-interest loans to pay their mortgages. Under that program, borrowers are eligible for loans of up to $60,000 that can be repaid over an extended period with payments as low as $25 a month.
Eighty percent of the borrowers who have participated were able to stay in their homes, outperforming other foreclosure-prevention efforts, said Mark Schwartz, a board member of the Pennsylvania Housing Finance Agency. "This is a program that is really geared for the unemployed or people who have had an interruption in their income due to no fault of their own," he said.
Treasury Department officials said they were considering the Pennsylvania model as well as other proposals. But Herbert M. Allison Jr., Treasury's assistant secretary for financial stability, told the committee that the current focus is on moving borrowers already enrolled in the program from the "trial" phase to a permanent modification.
Hundreds of thousands of borrowers are in jeopardy of losing their loan modifications by the end of the year because they have not turned in documents -- from tax returns to pay stubs -- that show they qualify for the program, government officials have said. Treasury is scheduled to release detailed data this week, listing how many permanent modifications large lenders have completed.
"I think banks have a long way to go to get up to their full potential to help alleviate this problem," Allison said. "We're not satisfied by any means."