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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

March 25, 2010

HOMEOWNERS GETTING LITTLE HELP FROM OBAMA'S FORECLOSURE PLAN

SHAHIEN NASIRIPOUR, HUFFINGTON POST - The average homeowner in the Obama administration's signature foreclosure-prevention program owes more on their mortgage than their home is worth, yet the program does virtually nothing to address this problem, according to a scathing new report by a government watchdog, casting doubt on the effectiveness of the $50 billion effort.

The average homeowner may owe their lender as much as two-and-a-half times more than the home is worth, the Office of the Special Inspector General for the Troubled Asset Relief Program states in its new report examining the administration's year-old Home Affordable Modification Program, citing November data from Fannie Mae. The Treasury Department told government investigators that the average homeowner likely owes their lender about $1.14 for every $1 of the home's current market value, the report notes.
Yet the program doesn't address this problem of negative equity -- commonly referred to as being "underwater" -- according to the report. The administration's effort has been touted as a way to stem the rising tide of foreclosures by reducing monthly payments for up to four million troubled borrowers.

Mortgage servicers forgave principal on less than two percent of HAMP trial loans, the report notes. But before HAMP, 10 percent of servicer-sponsored mortgage modifications forgave principal, according to the report. Servicers are incentivized to lower monthly payments by getting cash for every sustainable mortgage modification. . .

This data had never been publicly disclosed prior to Tuesday.

About a quarter of all homeowners with a mortgage are currently underwater, according to real estate research firm First American Core Logic. The watchdog report notes that underwater homeowners represent about half of all foreclosures.

The lack of principal reductions, which the report notes is the "primary method of quickly addressing negative equity," may lead to homeowners walking away from their mortgages.


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