U.S. reports fewer enrollees, more dropouts in federal mortgage relief program
Tuesday, June 22, 2010
The Obama administration's marquee foreclosure-prevention initiative continues to struggle, as government data released Monday show that fewer homeowners are enrolling in the program and more are losing their federal mortgage aid.
Lenders enrolled homeowners into the mortgage relief effort, known as Making Home Affordable, at a slower pace last month after federal officials tightened the qualification process. Since the program's launch last year, about 340,000 homeowners have received a permanent loan modification that lowers their mortgage payment for five years.
But a growing number of borrowers are failing to move from the program's initial stage into a permanent loan modification. Lenders have said that many homeowners are failing to make the reduced loan payments and others have not been able to prove they qualify for mortgage assistance. The number of borrowers dropped from the program, about 436,000, eclipses those who have been helped, according to Treasury Department data. More than 100,000 borrowers lost their mortgage aid in May.
About half of the those dropped from the federal program received another type of loan modification from their banks, according to the government data. But housing counselors have complained that those alternative loan modifications are typically not as generous as what the government program offers and often come with hefty upfront fees.
"Obviously it's good to know these people haven't gone through foreclosure yet," said Julia Gordon, senior policy counsel at the Center for Responsible Lending. But there is no guarantee that lenders are offering modifications that will be sustainable for homeowners, she said.
Obama administration officials stressed Monday that Making Home Affordable is just one of several efforts to stabilize the housing sector. The administration unveiled a new "housing score card" pointing to the millions of home buyers who have taken advantage of tax credits worth up to $8,000, while noting that home prices have stabilized and mortgage rates are near historic lows.
The "housing market is significantly better than anyone predicted a year ago," Housing and Urban Development Secretary Shaun Donovan said during a conference call with reporters. "Obviously we're not out of the woods. Our housing market remains fragile."
The latest numbers come as lawmakers prepare to consider on Tuesday a provision to offer up to $3 billion in loans for unemployed homeowners who need help paying their mortgage. The proposal seeks to address an issue that has bedeviled foreclosure- prevention efforts for more than a year: An increasing number of borrowers can't make their loan payments because they have lost their jobs. With little or no income, these borrowers struggle to make even the reduced payments offered under the government foreclosure-prevention program.
The loan-assistance provision, which is being debated as part of financial reform legislation, is modeled after a Pennsylvania program that offers unemployed workers low-interest loans to pay their mortgages. Borrowers are eligible for loans of up to $60,000 that can be repaid with payments as low as $25 a month.
The measure could help 500,000 families who have lost their jobs save their homes, said Rev. Lucy Kolin, a spokesman for PICO, a national network of faith-based community organizations.
"Unemployment is the number one cause of foreclosures, and yet little continues to be done to help these struggling families," he said. "If Congress was willing to bail out the very banks that caused the recession in the first place, they owe it to the American people who are bearing the brunt of the recession's impact to include this provision in the final financial reform legislation."