As stated in previous blogs, the Obama administration is attempting to help homeowners to keep their property and force banks to make substantial changes towards the principal. The idea is to make the Banks take more responsibility and to allow substantial help to the homeowners. Many governors are opting for their own settlement and course of action to effect real change. Below an article by Shashien Nasiripour provides another type of action, I agree that any real change will have to strenghten the homeowners direct access to a modification without the typical run around that banks engaging in.
September 2, 2011 12:04 am. © THE FINANCIAL TIMES LTD 2011
FEDERAL GOVERNOR URGES MORE HELP FOR HOMEOWNERS
By Shahien Nasiripour in New York
Elizabeth Duke, a Federal Reserve governor, called for fresh government action to help troubled homeowners on Thursday as the number of distressed borrowers entering the administration’s primary foreclosure-prevention scheme fell to a two-year low.
Barack Obama, the president, will make a speech next week outlining how his administration intends to create fresh jobs but is also expected to announce proposals to help the housing market recover.
Some 4m homeowners are eligible for the administration’s mortgage refinance scheme, the Home Affordable Refinance Programme (Hamp), but only about 800,000 have taken advantage, Ms Duke said in a speech in Washington.
“Finding different approaches to the policies that are hindering refinancing would likely provide some support to the economic recovery, while improving the circumstances of homeowners and reducing the overall level of credit risk borne by the various holders of the risk,” she said.
Ms Duke said that high up-front fees for borrowers wishing to refinance and the reluctance of lenders to originate new mortgages, which could expose them to litigation risk from poor underwriting, were among the impediments.
While the administration’s refinance initiative struggles, its modification programme is faring no better. More than 14,000 troubled borrowers began making reduced mortgage payments under Hamp in July, the lowest number of new entrants since April 2009, according to Treasury data published on Thursday.
The programme was launched in March 2009, with the intention of lowering monthly payments for up to 4m homeowners. More than two years in, fewer than 800,000 borrowers are making smaller payments.
The number of homeowners entering the programme has steadily declined over the past six months. About 33,000 borrowers began trial programmes in February. More than 1m homeowners were eligible for the programme as of last month.
While the programme continues to reach far fewer people than initially expected, the White House – which on Thursday acknowledged the “continued fragility” of US housing – faces fresh challenges posed by the worsening finances of US homeowners.
Newly delinquent home loans are on the rise, according to the Mortgage Bankers Association. The number of borrowers who missed one payment rose last quarter from the period ending in March. The trade group linked the rising number of delinquencies to the rising unemployment rate.
The number of reworked mortgages outside the administration’s programmes has also fallen, according to Hope Now, an industry group. There were 21 per cent fewer modifications last quarter compared with the previous period, ending in March.
An administration official said the White House remained committed to helping distressed homeowners. It has previously said that its programmes had been successful in stopping a sharper deterioration of the housing market.
Hamp aims to reduce payments by paying mortgage servicers, homeowners and investors for successful loan modifications. The initiative has been dogged by inadequate servicing practices by the companies that dominate the US mortgage market.
In response, the Treasury recently began withholding payments to Wells Fargo, Bank of America and JPMorgan Chase, the three biggest servicers who collectively process nearly half of all home loans. All three needed “substantial improvement”, the agency said in June.
Wells Fargo has since improved its practices and will receive about $21m in withheld payments, the Treasury said. But BofA and JPMorgan again failed to meet benchmarks and the department will continue to withhold about $18m from BofA and $28m from JPMorgan. Both companies said they continued to improve their operations.