Obama administration revising foreclosure prevention program
Thursday, March 25, 2010; 11:33 AM
Facing growing criticism of its foreclosure prevention program, the Obama administration told a House panel Thursday it was making several small changes to the effort.
Borrowers who are in bankruptcy will now be eligible for mortgage relief under the federal program, known as Making Home Affordable. Lenders also are being directed to evaluate delinquent borrowers for the program before referring them to foreclosure, according to written testimony submitted by Herb Allison, Treasury's assistant secretary for financial stability, in advance of a hearing before the House Committee on Oversight and Government Reform.
These changes "will provide borrowers with a number of new protections in the [program's] evaluation process to help address some of the confusion and anxiety that some borrowers reported surrounding their rights during the evaluation process," Allison's testimony states.
Challenges to the program remain, Allison said, but it is on track to reach its goals. For the program "to reach its potential, implementation must continue to be improved, servicers must recommit to a better borrowers experience and outcomes, and program enhancements must continue."
But the changes are incremental and do not address some of the fundamental problems that have plagued the program, which was launched a year ago.
"We continue to hear numerous reports of borrowers who want to participate in HAMP, but just don't know where to begin," said Rep. Edolphus Towns, chairman of the committee. "If they do begin, they often encounter unresponsive lenders, repeated incidents of lost paperwork, and a variety of other administrative frustrations."
So far, fewer than 200,000 borrowers have been granted permanent loan modifications. And the program is now expected to help far fewer than the up to 4 million struggling borrowers initially envisioned.
Neil Barofsky, special inspector general for the Troubled Asset Relief Program, has also warned that many borrowers are at risk of redefaulting on their mortgages even after receiving help under the federal program -- especially those who owe significantly more than their homes are worth, or have second mortgages or other debts.
More than two dozen House members sent a letter Wednesday to Treasury Secretary Timothy F. Geithner urging him to consider creating a new federal entity modeled on the Home Owners' Loan Corp., a New Deal agency created by President Franklin D. Roosevelt to refinance homes and prevent foreclosures. This entity could be launched quickly and paid for by available bailout funds with "little or no long term cost to the taxpayer," the letter stated.