Government Program to Keep a Check on Foreclosures Failed

It is reported that despite the aid programs of the U.S. Treasury Department, the rate of foreclosure is still on the rise. Another problem that the homeowners facing that the help are not reaching to the people who need them.
Neil Barofsky who is the special inspector general for the Troubled Asset Relief Program, reported, “The Treasury’s Home Affordable Modification Program, or HAMP has made very little progress in stemming this onslaught, with 230,000 mortgage loans permanently modified in a year.”

This is the second report in the past two weeks. This criticizes the $75 billion foreclosure-prevention program of the department to help lenders to review and modify their lower homeowners’ monthly payments and troubled mortgages. According to the report, since the start of Home foreclosures in the U.S., the number is on its way to cross the 2.8 million mark during this year as there are another 932,000 filings likely to be reported in the first three months of this year.

The report found that the borrowers who got help from the program were still the defaulters to clear their mortgage payments. It is expected by the Treasury, that 40 percent of the mortgage loans that were modified under the HAMP program will be defaulters.

To respond to this report, another report was released with the TARP inspector’s report. Herb Allison who is the Treasury’s assistant secretary for financial stability commented in that response, “The department will take steps to increase the transparency of the HAMP program and will set targets for key program objectives this year.”

According to the report that was published last week, around 1.1 million housing units received the benefits of the trial loan modifications that came with the Home Affordable Modification Program by the end of February. This helped the homeowners to have an average savings of $500 a month. The treasury department said, “Homeowners have saved a total of $3 billion in lower monthly mortgage payments under the plan.”

Barofsky’s report said, “a reason for the failures is about half of troubled mortgages are on homes with second liens, which remain in effect after first loans have been modified to reduce payments.”

The other reasons for the failure of the program are that the total amount of debt was not considered for the borrowers and the estimation of their financial condition was not checked properly. The report said, “HAMP borrowers have a median debt-to- income ratio of 61.3 percent even after their mortgage payments have been lowered.”

Original Post: According to Reports the Government Program to Keep a Check on Foreclosures Failed