UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

June 9, 2009

MORTGAGE RESCUE PLAN NOT WORKING

Dick Morris & Eileen McGann - In the month ending on May 26th, [there were] 464,983 foreclosures of subprime and Alt-A mortgages (out of a universe of 3.2 million studied). So 15% of all subprime mortgages were foreclosed in May. Only 19,041 -- a paltry 6% -- were modified during this period. And of those modified, only 11,200 involved any reduction in the monthly payments. Only 12% involved any write-off of interest, fees, or principal and 27% of the loan modifications actually increased the monthly payments due. Alan M. White of the Valparaiso Law School, who conducted the study, noted that the data showed that "the Administration's plan to stimulate mortgage modifications does not seen to have had much effect yet, at least in this market segment" [i.e. subprimes].

And the trend lines are all bad:

- The number of loan modifications dropped 11% from April to May.

- The ratio of foreclosure losses to modification write downs (the amount lost in foreclosure: the amount rescued by write-downs) doubled in the past month. For every dollar saved in modifications, $150 was lost in foreclosure.

When Obama launched his mortgage rescue plan, he promised that it would help five million households. So far, he is about 4,969,000 short of his goal.

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