Treasury Gearing to add more Teeth to Foreclosure Prevention Programmes

The Obama government is planning to give more teeth to its foreclosure prevention programme in the last week of January. Already $75 billion has been targeted for it. More latitude would be given regarding documentation requirements from the borrowers who are seeking assistant from this measure – HAMP. Financial executives have had meetings with treasury officials.

HAMP has widely been considered a failure. These changes are being brought about at a time when it is coming under sharp criticism for having failed to even come close to the target. Pressure is mounting for the government to pay less attention to the banks and do more for the families struggling with foreclosures and unemployment.

The help being extended will take into account that for a good number of borrowers their pay cheques have either vanished or gone down considerably. As such they are failing to be current in their mortgage payments. This was reported by insiders from the banking industry that chose to remain anonymous as they do not want to court the ill will of government officials.

The banking personnel said that the Treasury would be mulling over the new methods which might either be in the form of direct cash help or allowing further grace period to the borrowers letting them postpone their payments.

Experts opine that the changes that are being planned would in all probability make the mortgage firms put in more speed in lowering the payment schedules of defaulting borrowers. This would be done at the cost of dragging on the foreclosure mayhem. There is also the point that my removing stringent documentation requirement there is the danger of allowing people who could not afford their houses again run the risk of re-defaulting.

A mortgage consultant, Edward Pinto, who had once been chief credit officer of Fannie Mae (late 80s) said, “They are turning this from a legitimate program to try to save people who have the ability to hang on their homes into one that says, forget the willingness and ability to pay, let’s just postpone foreclosures.”

The Treasury officials were reluctant to divulge details. Michael Barr, the Assistant Secretary of the Treasury said, “We expect to issue guidance to servicers next week to expedite conversions of current trial modifications and provide guidance on documentation

While declining to provide details, the Treasury confirmed its plans to alter the program at a meeting next week with mortgage companies — servicers, in industry parlance. We are continually reviewing our housing plan to ensure that it promotes stability.”

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