Treasury’s Foreclosure Prevention Plans Yet to Take Off in Earnest

The watchdog set up by the Congress reported that the Treasury is still battling to get its programmes for foreclosure prevention take off in earnest. This report released by the Congressional Oversight Panel to oversee the spending of bailout funds came at a time when the Treasury is poised to release its monthly findings on the HAMP plan involving $50 billion. As yet only 230,000 residential houses have been able to get their loans permanently modified till the close of March 2010. In February the number was 169,000.

These figures are meagre compared to the staggering number of about 8 million houses lagging behind in their mortgage dues or are already in the foreclosure zone.

According to the panel the HAMP plan could stop or delay 900,000 or at the best 1.2 million foreclosures. But the fear is that the bulk of these homeowners would start to default once more. The panel gave out this warning.

The Obama government explained that HAMP is doing its work. The numbers of those helped is “modest” considering the magnitude of the problem said the chairperson of the panel, Elizabeth Warren. She admitted that it was not clear how many should get governmental help because there were many living in houses they could ill afford from the beginning.

Incentives to the lending group and the borrowers are being continuously expanded by the government. But this has resulted in the banks delaying matters “in the hope that Treasury will further sweeten the pot.” The report further stated that the financial entities “have expressed confusion about the constant flux of new programs, new standards and new requirements.”

HAMP modification of loans is leaving out those borrowers who are burdened with second mortgages and loans on credit cards and cars. The report read, “Most borrowers who proceed through HAMP will face a precarious future. Many borrowers will eventually re-default and face foreclosure.”

In response to the report the spokesperson of the Treasury said, “The administration’s programs were designed to help responsible, eligible families keep their homes, not for investors or speculators, and not to save million-dollar houses or vacation homes.”

Republicans are unhappy about what they think to be the unfairness of the programme. At the hearing of the panel Rep. Jeb Hensarling of Texas calculated that 94% of them are either owners of debt free homes – being current on their mortgage payments or tenants paying their rents timely. He said, “They are being asked to bail out the other 6%”. It’s a policy that says to the citizens who work hard, who live within their means, who save for a rainy day –‘you are a sucker.’”