Shahien Nasiripour, Huffington Post
More than one year after the Obama administration launched the most ambitious effort to help struggling homeowners since the Great Depression, the White House took another step forward Friday by announcing a plan to reduce the amount owed by underwater borrowers
The administration’s much-criticized $75 billion effort, Making Home Affordable was supposed to stem the rising foreclosure crisis through multiple initiatives, the most prominent being the Home Affordable Modification Program (HAMP), an incentives-based approach to helping homeowners avoid foreclosure by paying lenders, services, investors and homeowners for every successful loan modification.
That approach has largely been ineffective, according to analysts, consumer advocates, and government watchdogs, because it doesn’t attack the core of today’s foreclosure problem — underwater homeowners and unemployment. One top analyst said it was “destined to fail.”
There are more than 11 million homeowners who owe more on their mortgage than the property is worth, representing about a quarter of all homeowners with a mortgage, according to real estate research firm First American CoreLogic. But the administration’s offers of assistance have largely failed to help them.
The new plan consists of two parts. One, through HAMP, will work by encouraging lenders and servicers to consider principal cuts early on in the mortgage modification process, rather than first relying on interest rate cuts and extending the life of the loan. Mortgage servicers forgave principal on less than two percent of HAMP trial loans, according to a report this week by the Office of the Special Inspector General for the Troubled Asset Relief Program. That’s despite the fact that on average, homeowners in HAMP owe $1.14 on their mortgage for every $1 in their home’s current market value, according to Treasury Department estimates cited in the report. “HAMP allows principal reduction, but it is not typically implemented in practice,” the report states.
read more here: http://www.huffingtonpost.com/2010/03/25/obama-to-order-lenders-to_n_513990.html
