Foreclosures in Southern California are still on the rise. Though this same problem is showing up all across the country, we are among the hardest hit locations.
Since the Obama administration launched the Home Affordable Modification Program (HAMP) in February of 2009, there was speculation from many as to whether or not the program would really help keep homeowners from losing their homes. The program reserved $75 Billion to incentivize lenders to reduce borrowers' monthly mortgage payments in an effort to avoid foreclosure on the borrowers' homes.
Fannie Mae's official HAMP website reports that the program was created to help 3-4 million homes from going into foreclosure. The question is...is it working? Some things to keep in mind about this program is that banks get incentives to reduce loan payments. The key is to get the payments to no more thatn 31% of the borrower's monthly income. in several ways: 1. they can reduce interest to 2% 2. extend the loan life to 40 years 3. or defer some principal and waive the interest.
Many of the banks are using a three month trial period where they extend a temporary loan modification. The trial period is supposed to show that the borrower can keep up with the new payments and document financial hardship before the lenders commit to permanently altering the loan. Currently, there are 1.3 million homeowners who have received temporary modifications and only 170,000 who have received permanent. Apparently the Treasury Department is now saying that the goal was always to "offer" help to 3-4 million people...not ACTUALLY help 3-4 million.
On Tuesday, the Special Inspector General for the Troubled Asset Relief Program released a report stating that there were no meaningful goals with this program and the government should not base the success of this program on the number of homeowners who only receive temporary mods. Let's face it...only 170,000 people have received permanent help....while the banks are still getting incentives for temporary mods. Who is really being helped here?
So for a quick recap: HAMP plan is implemented to "offer" help to 3-4 million homeowners. Today 1.3 million are receiving temporary help, but it doesn't look promising that many of them will be able to complete the process to receive permanent help. So...taxpayer money is going to banks for temporary help, and then the banks will ultimately get the properties back anyway. The Treasury Department is suggesting that 40% of the homeowners helped will re-default after the trial period. Why are we spending taxpayer money in a down economy to prolong the inevitable with a program that just IS NOT helping?
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