Modification Programs Failed

As previously stated The Treasury was initially allocated $700 billion for the Troubled Asset Relief Program (TARP). TARP funded the home modification programs. The U.S. Treasury Department oversees TARP.

The home modification programs have failed.

In 2009, the amount TARP gave to help distressed homeowners was $46 billion. Last month, according to the U.S. auditor’s report – less than 10% of the $46 billion was actually used in the past three years.

What happened to the other 90% – the $41.4 billion left over for the distressed homeowners? TARP had money for the big banks – and those Federal funds seemed to have reached the banks without any trouble. Why haven’t the funds reached the homeowners?

TARP committed and loaned $250 billion to the banks for bailouts, $82 billion was committed to the auto industry (GM’s $60 billion restructured bankruptcy, $15.2 billion for the Cash for Clunkers program etc.), $70 billion went to insurer American International Group (AIG) and $46 billion committed to Housing.

TARP’s original purpose was to purchase “toxic assets” from banks. In 2009, U.S. Treasury Secretary Timothy Geithner announced his plan to use the remaining $300 billion of TARP funds with $250 billion going to help fund private investors buy “toxic assets from banks” and $50 billion towards foreclosure mitigation (adjustment for homeowners).

One program was allocated $8.1 billion to help homeowners who are underwater and insured by the Federal Housing Administration (FHA). $6.6 million of that went to “administrative expenses” and a whopping total of 1,437 homeowners were helped (that breaks down to the equivalent of almost 72 people for each state).

FHA loans had another $45.6 billion allocated under the “Treasury Housing Programs under TARP”. This program was supposed to help refinance loans and even forgive some. So far, a measly $3.83 billion has been disbursed – a little over 8%.

Another program, allocated $2.7 billion to encourage lenders to write down or eliminate second liens when refinancing properties insured by FHA – but not a single removal of a second lien has occurred through this program.

Home Affordable Modification Program (HAMP) has spent about 10% of the $22.7 billion given to them as of last month. It’s been three years and HAMP has helped fewer than 1 million homeowners. Worse – many homeowners who tried to enter the HAMP program ended up owing more back fees and late penalties to the bank when they were denied the modification. They’re in worse shape than they were before they applied.

Hardest Hit Fund (HFA), was allocated $7.6 billion for families in states with the largest number of distressed homeowners, but has only approved a mere 43,580 people. That’s the equivalent of 3% of the funds (report issued by the Office of the Special Inspector General for TARP). If you applied for HFA – is it any wonder you were denied? This program ends in 2017. (Colorado is not an eligible state under the HFA and an alternative program, Emergency Homeowner Loan Program, EHLP, has ended.)

These dismal figures are only the tip of the iceberg. Each week, my office receives calls for appointments from overwrought homeowners who have been turned down for modifications/options and reductions. Most of these homeowners, who thought their loan was on-track for modification and sometimes even assured of a modification, came home and found notices posted to their front door for foreclosure. (Read the “Dual Track” article on this blog from August 2012.) So many of these homeowners could have been helped.

The U.S. Treasury needs to establish program goals and develop performance data, and a plan to ensure homeowners receive the money set aside to help them.

There are so many different options and confusion associated with the various housing relief programs. I’ve listed the major programs below, for a better understanding.

If you do decide to try one of these programs, please – make sure there’s a .gov on the website. The government is the only place to apply, don’t fall for the many scam artists assuring you they’ll get you a modification, new loan or even keep you out of foreclosure (for a fee).

Home Affordable Modification Program (HAMP) – lowers monthly mortgage payments to 31% of your pre-tax income.

Home Affordable Refinance Program (HARP) – designed to refinance mortgage to lower interest rate (you must be current on your mortgage).

Hardest Hit Fund (HFA) – aid for families in states hit hardest by economic and housing market. Varies state to state, but can help with payment assistance, reduction, eliminate second loans. Colorado is NOT a designated state.

Making Home Affordable (MHA) – refinance with lower interest, mortgage relief while searching for re-employment, help with underwater homes. Note: this program ends December 31, 2013.

Principal Reduction Alternative (PRA) – reduce principal amount owed if home is underwater (Freddie Mac and Fannie Mae not eligible). To date, less than 7,000 permanent modifications were approved.

Second Lien Modification Program (2MP) – if First Mortgage modified under HAMP, and you have a second loan, the second loan may be reduced or modified.

Treasury/FHA Second Lien Program (FHA2LP) – if you have second loan and your lender of the first loan agrees to participate in a FHA Short Refinance, second loan may be reduced or eliminated.

Home Affordable Unemployment Program (UP) – temporary reduction to 31% of your income or suspension of mortgage payments for 12 months.

Emergency Homeowners’ Loan Program (EHLP) – This program has expired according to today’s HUD website.

FHA Forbearance for Unemployed Homeowners – extends forbearance period for unemployed homeowners to 12 months.

Home Affordable Foreclosure Alternative (HAFA) – provides options for transitioning out of your mortgage through short sales and Deed-in-Lieu.

Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.

About theglawfirm1

Gantenbein Law Firm is a Denver, Colorado Tax Law Firm, servicing all of Colorado. Gantenbein Law Firm also specializes in Colorado Real Estate Law, Colorado Foreclosure Defense, Wills & Trusts, and Business Law.
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2 Responses to Modification Programs Failed

  1. Dan C says:

    Excellent point……. The administrative costs alone, to run so many different programs is staggering, notwithstanding, the fact that so few homeowners and families have actually been helped when they really needed it.

    One more important issue about money, that should be added to this list of failures, has to be the $26 Billion from the settlement with the top 5 TBTF Banks from earlier this year.

    I’ve looked everywhere to see if any of that money has turned up in my pocket, I’m one of those people the AG’s were suppose to be representing in that settlement but somehow my paltry share seems to have gotten lost.

    Next time there’s a settlement or a payout with the Banks we should use a chemical red dye on the bills so we can track the progression of those funds through the system. Does the phrase, “caught red handed” ring a bell with anyone…..

    Another informative piece, Keith….

    I look forward to your articles.


  2. Pingback: Heartless Wells Fargo Evicting Terminal Cancer Patient Over Holidays « defendyourhomefightforeclosure

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