The Administration's Foreclosure Program - In Need of Major Changes

The government made this problem, now everything they are doing to clean it up is only prolonging the pain and making it worse.  No Bailouts - Just Cut spending and cut taxes.

Jessica you are harsh...many of these consumers were victims of a bubble in values, many were profiteers who deserve what they got, a few were dishonest frauds.  We can't paint everyone with one brush.

OK - a simple point that all are missing...Yes there is a problem.  It started a long time ago with the democratic congress that housing should be affordable for all.  Programs were offered to those with lower income - thus artificially driving the cost of lower quality homes upwards.  The programs were then pushed to their limits to qualify people for homes slightly above what they can afford.  Thus driving those prices higher that they should be.  I lived in Arizona for 5 years.  I purchases my home for 215000 and saw the value rise to over $400,000.  I had lenders and agents calling me to refinance and sell.  I just sold this summer for $270,000.  Just where it should be.  

None of the Gov't plans work.  Self correction is what will fix our market.  But shame on the LO's AND Agents out there who would "talk with the appraisers to get the value the needed for the offer...

So what am I saying...the industry is to blame just as much as the Gov't, we all let it happen now we must suffer too.

Art:

And how did that bubble happen? Everybody should own a home...

No, what will be harsh is when all the artificial sweeteners run out and we're left drinking this bitter cup.  Correction is painful, but we've got to put the crack pipe down and get off the drugs. There are consequences for our actions and running to the government to fix the very problems they helped create is insanity.

Great post! I too have been following the Home Affordability Modification Program and the general consensus seems to be that it has not worked as promised. Is more government intervention the answer? Is more accountability from the Homeowners the answer? I am not sure about either one, but I DO know that the process of requesting a loan mod under the HAMP, let alone getting one actually approved and permanently modified is proving to be a nightmare for most Homeowners. 

I just read an article in the local newspaper that Bank of America has hired VOLUNTEERS to knock on their neighbor's doors that are behind on their payments and ASSIST them with the process! If this works, they are talking about expanding this effort.

We STILL have a long way to go!

Hi Claudette, Wow, you generated a lot of great comments. My concern is that the housing boom was created with bad legislation, artificially low rates and ridiculous qualifying parameters. All resulting in a real boom bust scenario. Yes, it did artificially pump the economy up for a time, but are we paying the price for that now or what?

The second concern is that the statistics of loan modification are not encouraging. The last I saw is that about 60% of these homes are back in foreclosure within 6 to 8 months after the modification. What else would you expect? Unqualified buyers are still unqualified buyers. More proof that government rarely solves any problems. Unfortuantely, the real solution is to let the markets operate freely and settle out at the real values. Painful? Yes. but a more lasting stronger base will be formed for the economy to grow from in the future.

And these are the same politicos who want to run your health care. Beware!

Well,  here is my recent experience.   

Single mother saved her money, has excellent credit but not a real high income.  We found a manufactured home close to her parents in  very good shape which the previous owners had signed over a deed in lieu of foreclosure with a loan balance of more than $105,000.

Listed at $80k we bid on bidselect at $62,000 and got the contract.  HUD Appraisal was $100k in July.  The day we received the response on bidselect, our lender advised us that her manufactured lenders had pulled out.  No lender, promptly found another lender.  That lender got her info from the closing agent on 5 days later.  The closing agent is an attorney.  Texas uses title companies normally.  Title companies give the lender a closing protection letter.  Attorneys are not title companies so they give E&O.   NONE of the manufactured home lenders accept E&O, only accept CPLs.   Lost that lender.  Got on the HUD website and started calling lenders,   ones we knew & ones we didn't.  Several promised they could do it;  UNTIL they checked with their underwriters.  NO CPL, no loan.    I spoke to Southwest Allliance.  Could they move closing to a title company.  We have SEVERAL lenders who will do the loan IF we close at a title company instead of an attorney's office.   NO DICE.  Close with an attorney only;  the lender not accepting a CPL is not a good enough reason to refund the earnest money in the eyes of HUD.    WE finally found a lender who said they would do the loan as an exception.  THEN the lender changed their minimum loan requirements to $65k.   Buyer was willing to pay $5k more to complete the deal.  Spoke to HUD to INCREASE our offer $5400 and they DECLINED to amend the contract.

Ready, willing and able buyer offering $5000 EXTRA on contract and was turned down.  Makes sense to me, doesn't it to you?  & We the taxpayers are paying for this insanity.

Until the government and this administration get out of the way and let the market correct itself, we will only be kicking the can down the road. The Loan Modification Program (H.A.M.P.) has been a disaster. Lenders realize it is more financially rewarding to foreclose than to do a loan modification. Large numbers of these LM's are defaulting. We are facing another wave coming in mid 2010 with the Alt-A's and Option Arms.

Gov't & Wall Street are gaming the market and propping it up. These will eventually fail. The question is not if but when. The quicker we allow the market to correct, the better off we will be. There is no way to avoid the pain, but as with a band-aid, it is easier and less painful to just rip it off quickly rather than slowly.

Hi Claudette -- If all the changes are the two you listed (primarily), then I don't think these changes will have any measurable, positive impact.  I keep reading that the alt-a and arms going into default will keep rising for the next several years, so I'm not sure the current problem is being addressed.  I would rather see the government get out of the way, have a massive amount of pain for a shorter period of time, and then create some common sense regulations so the play money people can't just wreak havoc at will.

The fundamentals were wrong to begin with...

All of the programs created by an entity to fix a problem they created is not the solution.... it's the problem in extending the pain even longer.

Katerina & Jessica certainly get it... I suggest anybody else who does not get it take a day or two and learn about the giant pool of money, the Federal Reserve and the relationship between D.C. and Wall Street.

Maybe then you'll understand what and why over a Trillion of Taxpayers money is being spent for...

Artificially propping up high home prices does not benefit Main Street in the long run....

Thanks for the update, it is hard to keep up with all of the changes that are going on.

Hi Claudette. I work with short sales and REOs and from experience TARP money is not helping many homeowners. Instead it is delaying recovery while masking the government's aide to certain corporations.  The government helped some corporations more than they have helped homeowners. IMPO they should stay out of business and focus on increasing its efficiency before creating havoc on business with their inefficiency. I remain hopeful. ~ Lana

Claudett,

Its amazing the customers that do not know about this program.

Claudette:  Congrats on the feature.  I don't think any changes to Making Home Affordable is going to do any good at all.  It boils down to the fact that some people financed homes in crazy ways because they could not afford them otherwise.   Unless principal balances are reduced (and boy would that piss off a lot of Americans were are upside down and making their mortgage payments on time), this just needs to run it's course.

As usual the banks and other lenders are taking advantage of many people who are losing their home when they should not be.  The whole foreclosure thing is a tragedy in my opinion.  It seems like a lot of homeowners don't think it is a big deal to let their house go into foreclosure.  That attitude is a reflection of society as a whole.

The government programs are not doing what they are supposed to do, and I'm not convinced anything will change any time soon.

This program is important, but it is more important to have a program to create jobs now.

David Cook, comment #36 above, NAILED IT. The solutions are out there, but the bankers own the politicians, and neither want things to "get better"... They benefit by the chaos & turmoil...

There are so many problems with the mortgage crisis right now that I don't even know where to begin. Foreclosures, fraud, ID theft and so many more. I don't like government involvement, because their idea of a fix is to throw money at the problem. We see where that has gotten us and it certainly isn't the right direction. I think investors need to hold their processors accountable rather than the government.