Federal aid is forestalling only a fraction of foreclosures, report says
Thursday, April 15, 2010
The government's foreclosure prevention efforts are struggling to make an impact on millions of borrowers who are in trouble on their mortgages, according to a report issued Wednesday by a congressional watchdog panel.
The program, known as Making Home Affordable, is on course to prevent only about 1 million foreclosures, aiding a small fraction of the homeowners who are in trouble with their mortgages nationwide, according to the report by the Congressional Oversight Panel, which monitors spending on financial bailout efforts.
About 230,000 U.S. homeowners had secured permanent loan modification under the program through last month, according to Treasury Department data also released Wednesday. That includes about 14,000 borrowers in the Washington region.
But many borrowers who have signed up for the program are in limbo, waiting to prove they qualify for permanent mortgage relief. And more than 150,000 have been dropped from the program because they didn't keep up with their payments or their lender determined they did not qualify after all, according to the Treasury data.
"Treasury's response is lagging behind the pace of the crisis," said Elizabeth Warren, head of the watchdog panel. "It also seems clear that Treasury's programs will not reach the overwhelming majority of homeowners in trouble."
Treasury officials said Wednesday that the federal program was never meant to prevent all foreclosures. "It's still going to be a very painful process for millions of Americans, but we're going to keep working to make sure this program reaches as many people as we can reach," said Treasury Secretary Timothy F. Geithner.
Last month, the administration announced that it was revamping the program, adding features to encourage lenders to slash the loan balances of borrowers who owe more than their home is worth, a situation known as being underwater. About 75 percent of the homeowners helped under the federal program were underwater on their mortgage, according the watchdog group's report.
In the Washington region, foreclosures continue to be a problem. On Wednesday, local nonprofit groups and government officials announced the creation of the Capital Area Foreclosure Network to coordinate outreach efforts to distressed borrowers.
The network, which includes the Metropolitan Washington Council of Governments and the Nonprofit Roundtable of Greater Washington as well as Fannie Mae and Freddie Mac, will share information among nonprofit groups and banks while coordinating a regional response to the foreclosure crisis.
"People walk into nonprofit housing counseling organizations every day seeking to prevent foreclosure. But these are really complex challenges, and the work is hard," said Chuck Bean, executive director of the Nonprofit Roundtable of Greater Washington. "Now, by bringing together all the players . . . we hope to better support the staff that are on the ground doing the work."
Meanwhile, a report by the Urban Institute, a District-based nonprofit policy research group, to be released Thursday found that by the end of last year, nearly 3 percent of outstanding mortgages in the Washington region were in the foreclosure process and 9 percent were delinquent. There are signs that the region's housing market is starting to improve, the report says. But in the far suburbs and eastern areas, many homes are languishing on the market before selling, according to the report. About 27 percent of homes for sale in the Washington region stay on the market for at least three months. But in Charles County, about 42 percent of homes on the market take at least four months to sell.
"The region still faces a substantial challenge from the foreclosure crisis. There are still a lot of homeowners behind on their mortgage," said Peter Tatian, senior research association for the Urban Institute.