House Republicans have passed legislation four times this year killing the Obama administration’s home-loan modification program, with the latest attempt coming just this week. But the bills have had no chance of becoming law, due to opposition in the Democrat-controlled Senate, even though senators admit the program is badly flawed and has not done enough to assist struggling mortgage holders.

 

Two years ago, Congress gave the Department of the Treasury $50 billion to operate the Home Assistance Modification Program. The administration insisted then that the effort would benefit three million to four million homeowners in danger of losing their American dream.

 

However, to date only a little more than 600,000 homeowners have received permanent loan modifications, and Treasury officials have spent barely $1 billion of what they were given. Meanwhile, foreclosures continue—225,000 filings in February alone—and home prices are still falling

 

“The banking industry fought us tooth and nail, and we ended up with a program that is failing homeowners,” Representative Zoe Lofgren (D-California) told The New York Times. “The administration doesn’t give us real enforcement or answers; we just get the old yokey-doke.”

 

A review of the loan modification program led the Times to conclude that it has been “crippled by weak oversight, conflicts of interest, mind-numbing complexity and poor performance by many participating banks.”

 

In fact, the banks appear to be the biggest culprits in the program’s failure. Concluding that in most cases modifying loans is less profitable than just foreclosing, banks conveniently lose paperwork and come up with creative reasons to reject permanent modifications. In one example cited by The New York Times, a Staten Island couple’s application for a permanent modification was rejected by HSBC because the couple overpaid their mortgage payment one month.

-Noel Brinkerhoff

 

Foreclosure Aid Fell Short, and Is Fading (by Michael Powell and Andrew Martin, New York Times)

House Votes 252-170 to End Fourth Federal Mortgage Program (by Peter Kasperowicz, The Hill)

Loan Modification Program Has Spent Barely 1% of Available Budget (by Noel Brinkerhoff, AllGov)

Mortgage Holders Doom Obama Foreclosure Plan to Failure (by Noel Brinkerhoff, AllGov)