Over the past year or so I've written quite a bit about the Obama administration's Making Homes Affordable program, as well as other mortgage modification programs.
The programs were conceived of and put into place to help homeowners buy homes and prop up a floundering real estate market, in addition to helping homeowners already in their homes – to be able to stay there. The Home Affordable Modification Program aimed to help homeowners facing foreclosure to stay in their homes.
End Or Revamp The Mortgage Programs?
While the heart of those programs may have been in the right place, the management of the programs hasn't been as good as could have been hoped, and now some members of congress are calling for the programs to be either killed or completely revamped.
A handful of foreclosure prevention measures run by the Obama administration are so ineffectual, inefficient and complicated that, according to Republicans in the House of Representatives, the programs should be killed outright.
The House is scheduled to vote this week on getting rid of a refinance program for Federal Housing Administration loans and another program, scheduled to begin next month, that would help homeowners with delinquent payments.
The House Financial Services Committee is expected to vote Wednesday morning on ending two other measures: One of them is a massive effort that was designed to adjust up to 4 million mortgages but so far has tackled just half a million successfully. The other is the Neighborhood Stabilization Program, which steers money to communities hit hard by foreclosures.
The Treasury Department and many Democrats argue, though, that the programs – though flawed – are fixable, and consumer advocates say the measures offer the last, best hope for many struggling families.
“It's all we have,” said Hazel Mack-Hilliard, the director of the mortgage foreclosure project with Legal Aid of North Carolina. “To have nothing and just say let the lenders do it, that's worse than nothing.”
The bills' chances of becoming law are slight, because Democrats control the Senate and the Obama administration supports the programs. But Republicans say their effort will shine a light on inefficient programs that they say aren't working and, in the worst cases, do more harm than good.
Mortgage Programs Hurt More Than Help?
Neil Barofsky, the special inspector general for the modification programs through the Troubled Asset Relief Program, told Congress last week that “HAMP has been beset by problems from the outset and, despite frequent retooling, continues to fall woefully short of meeting its original expectations.”
He blamed the Treasury Department for refusing to adopt “meaningful goals and benchmarks” for the program, but he stopped short of saying the Home Affordable Modification Program should be shuttered altogether.
The program was setup to fail from the start because it had no meaningful goals or benchmarks, and in many cases the banks had more incentive to foreclose, than to modify mortgages.
At this point it sounds like the bills to terminate the mortgage programs will have enough votes in the House, but the Senate and President Obama have signaled that they won't agree to end the mortgage programs. If the programs aren't ended, however, let's hope they are re-tooled and started off fresh – and that they're not just delaying the inevitable for some struggling homeowners.
What do you think? Have you had experience with HAMP or HARP programs? Were you helped by them, or did you get strung along? Did you end up getting denied a modification or refinance despite following the rules? Do you think the programs should be ended?
Ravi Gupta says
I’m currently a student and have never had a home. I don’t understand the role of the government in the housing crisis that we have here. If it is ultimtaly upto banks to decide whether or not they will adjust or foreclose they might as well leave it up to the banks.
I think you’re right about stringing along homeowners. It seems like with all these iniatives are going no where. Do you think it’s time for the US government to get out of housing initiatives?
Great article and thank you for including sources.
Mr. Money says
I certainly think that the government has had too much intervention in a lot of things lately. For a lot of these problems we’ve been having, their “solutions” haven’t solved anything – they’ve only extended the crisis by stringing it along longer than it should have gone.
Brad Chaffee says
“…others are saying that another reason to end it is that it just isn’t effective, and in the end what it mostly does is string people along and give them false hope.”
You said a mouthful here! The whole thing is a complete mess that has only helped a select few. We’ve been dealing with our home problem for well over a year now with no hope in sight. If the programs were invented to help homeowners stay in their homes then it completely failed. With that goal, foreclosures would have dropped instead of increased in the last year.
For the moment, our home is on the market and we are doing everything we can to get it sold. Since the bank turned down a solid offer because they wanted $5,000 more, we have been in limbo since.
Very frustrating and I am glad that after this nightmare is over, that we never have to worry about a mortgage ever again. The next house and any house thereafter will be bought using the unpopular but effective 100% down plan.
Mr. Money says
I believe they have actually shown that of the people who have gotten modifications through the program, a very high percentage are defaulting anyway. To me that says the program really isn’t doing what it sets out to do, and we’re just wasting money.
Good luck with your situation Brad. I know it’s frustrating dealing with a bank like that when they’re being stubborn. Stick with it and I’m sure you’ll come out smelling like roses on the other end – with your paid off house next time!
I have no experience with these programs, however just because they don’t work, should they be scrapped? The reason for the programs was to save homes and save the housing market from going off the cliff. The reasoning was it would affect all of us if that happened. What should be done?
Mr. Money says
Personally I think that if a program is only helping a extremely small number, and is spending much more than it should for what we’re getting out of it, it should either be scrapped or a new program should be created.
Quite honestly I don’t think the program could ever do what they said it would – to save the market from driving off the cliff. They just put their foot on the brake for a little while, and when they take it off in a short time, we’ll go off the cliff anyway. It’s only prolonging the pain for some people when they should be just ripping the band aid off.
Dr. Timothy Lawler says
I agree with Mr. Money. The programs were there to be good in idea, but you can’t stop a train heading straight off a cliff when it is only 50ft away from doing so. I also agree that many banks still find it better to foreclose than to try and keep distressed people in their houses. If you are a person with a ton of cash, now is unlike any other time in history to make a fortune. Thanks for the intriguing article. Keep up the great posts!
Mr. Money says
That’s right, sometimes you just have to let that train go off the cliff. :) Thanks for commenting.
Dr Dean says
I think the market has to clear all these homes for the real estate market to find a bottom.
There needs to be clear guidelines on who qualifies, a short application process, and a quick decision.
None of these things our government bureaucracy does very well.
Mr. Money says
It’s amazing how many comments I’ve gotten on some of my posts about the modification program. People do seem to be getting strung along for months at a time, and often they just get denied at the end for no apparent reason. The government at work!
See my response below. It’s not the government that’s causing the delays; it’s the mortgage lenders.
Maybe it’s ineffective, or maybe the govenment simply doesnt have the money to support it any longer, and they need another valid reason to publicly explain why they are dropping the program. At any rate, Im sure foreclosures will increase, thus dropping my home value even further.
I am a HUD-certified housing counselor so I do have some first hand experience with the HAMP program. It is complicated and hard to understand. That’s why housing counselors have gotten training to help people navigate the process. Unfortunately, many of the nonprofit agencies providing help are seriously underfunded and experiencing burnout.
In addition, the lenders are not very cooperative with families trying to modify their mortgages to avoid foreclosure. Although banks benefit from people staying in their homes even if paying reduced interest, they don’t seem to work very hard in their own best interest.
Most people don’t have the time, the heart, or persistence to get their mortgage lender to cooperate in their efforts to get help.
If the program is to continue, the banks will have to be forced to be more cooperative or nonprofit housing agencies will need a lot more funding to help people navigate a difficult and stressful process.
Adam Gottlieb says
Maybe I’m a bit on the cynical side, but I don’t think the government is so concerned about the plight of homeowners other than how the mortgage crisis is effecting the economy as a whole…
The funds in the Making Homes Affordable Program aren’t being directly given to struggling homeowners- it’s being given to the banks in a rather pathetic attempt to encourage them to have a heart and modify their loans instead of protecting their bottom lines.
The same sort of set up was made for small business lending. It’s a model that was doomed to fail even before it started, and it makes me question where the real loyalties lie.
Scrapping these programs will hurt more than help.
This is just one of the reasons people will vote a lot of politicians out of office.
Decisions like these prove how little Republican politicians care about people even when corporations have defrauded these same people.
Unfortunately there are people who are not facing a mortgage crisis could care less about those who were defrauded and are now losing their homes.
One of these programs helped a relative and her husband from losing their home after she became ill and her husband was laid off.
He is back working now but she can’t work due to illness.
Neither are lazy people.