Tapping the TARP - Will it Help the Housing Market?

Barack Obama has asked for and has been granted the release of the second $350 billion from the Troubled Asset Relief Program funds to the treasury.    

The request had been met with some debate from lawmakers, some who have argued that the first $350 billion were largely wasted and that there has not been enough transparency to show if and how the bailout program has worked. 

Originally sold as a two-step rescue program, TARP was designed for the government to buy Wall Street's failing mortgage investments and then to rewrite those loans to help homeowners. 

Much of the first half of the money has been used to buy shares in banks on the brink of collapse but has not eased the credit markets enough to help borrowers who are currently trying to get loans.

Currently, on the table is legislation to use $40 to $100 billion of the second $350 billion to help people who are about to lose their homes because they cannot make their mortgage payments. 

                                                 Foreclosure Assistance

• One of the initiatives will call for an extension of the foreclosure freeze moratorium that is currently in place from Fannie Mae and Freddie Mac.  This freeze is due to expire at the end of this month.   
• Bringing down the costs of Hope for Homeowner loans through coverage of the fees is another suggestion in the plan.
• Servicer authority for foreclosure mitigation will provide a safe harbor from liability to servicers who engage in loan modifications to help home owners who are facing foreclosure.
• A program for loans to pay down second lien mortages is listed as part of the plan.
• A bill has also been introduced that would allow bankruptcy court judges to alter repayment terms on primary mortgages.

Last year there were a total of 3,157,806 foreclosure filings, including default notices, auction sale notices and bank repossessions which was an increase of 81 percent from 2007.  Currently, an estimated 81 million homeowners in this country are at risk of foreclosure.

One of the biggest criticisms of TARP has been the fact that, so far, it has not helped struggling homeowners.  It appears as though with the release of the second tranche of the $700 Billion program, the foreclosure problem will need to be addressed.