Entries in Home Affordable Modification Program (3)


President Obama Preps for Debate Amid Nevada’s Housing Woes and New Criticisms of Housing Program

BRENDAN SMIALOWSKI/AFP/Getty Images(LAS VEGAS) -- One in 402 homes in Nevada is in foreclosure, according to RealtyTrac, making this the fifth-hardest-hit state in the country.

As the Los Angeles Times' Kathleen Hennessey notes Tuesday the Obama campaign “has set up its ‘debate camp’ in something of a metaphor for the nation’s economic woes -- and the president’s challenges.” Down the road from the resort are “empty storefronts at a ‘village’ of boutiques and restaurants. Surrounding the hotel where the president is huddling with advisors are scores of recently built condos and homes, each a worth a fraction of its value a few years ago.”

In the last few weeks, previous criticisms of the Obama administration’s housing program from Neil Barofsky, the former Special Inspector General for the Troubled Asset Relief Program, have been amplified by similarly harsh words in a new book from Sheila Bair, former chair of the Federal Deposit Insurance Corporation.

Barofsky Tuesday told ABC News that the “administration’s housing programs have been an abject failure in all but one aspect, protecting the big banks.”

Bair, a former Senate Republican staffer, recalls in Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself how she stood with President Obama in Arizona at the beginning of his presidency when he promised one of his new programs “will enable as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure.”

Bair writes “the president was masterful in announcing the program, though I cringed as he threw out what I considered to be wildly inflated numbers on the programs’ impact. Even with our own, more aggressive proposal, we had estimated the number of successful modifications at 2.1 million tops.”

That plan, known as HAMP -- the Home Affordable Modification Program -- has failed to reach its goal of 3 to 4 million modified loans.

In fact, notes Barofsky, it “has reached only a little more than one-fifth of its goal with more failed modifications (more than one million) than successful ones (825,000).”

Bair writes that “HAMP was a program designed to look good in a press release, not to fix the housing market.” Referring to former National Economic Council director Larry Summers and Treasury Secretary Tim Geithner, Bair writes that “Larry and Tim didn’t seem to care about the political beating the president took on the hundreds of billions of dollars thrown at the big-bank bailouts and AIG bonuses, but when it came to home owners, it was a very different story. I don’t think helping home owners was ever a priority for them.”

HAMP was, she writes, “doomed to failure. ... What’s more, it cheated borrowers. Because Treasury wanted to demonstrate quickly that huge numbers of borrowers were being modified, it let borrowers enter into ‘trial modifications’ whereby they would start making reduced payments pending completion of all of their paperwork. But many of the borrowers could not provide all of the extensive documentation required by the program, so they would be put into foreclosure even though they had been making timely payments for months!”

Barofsky adds that the Obama administration “also missed a remarkable opportunity to spend more than 250 billion in authorized and obligated TARP dollars (without a single additional vote from Congress) to rescue struggling homeowners and help kick start a housing recovery, and instead chose to let the money sit on the sidelines. If they had only treated the foreclosure and housing crisis with the same ferocity and dedication that they did the banking crisis, we would almost certainly be facing a far better looking economy today.”

You can read more on the Nevada housing crisis HERE and PBS recently profiled Las Vegas casino maintenance man Albert Decall, who paid $395,000 (with $100,000 down payment) for his home, only to see his home value plummet to less than half of what it was worth. Working with lenders through the HAMP program, he saved his house.

Copyright 2012 ABC News Radio


'Failed' Housing Programs: How Will Rental Market Benefit?

Creatas/Thinkstock(NEW YORK) -- Federal efforts to help struggling homeowners are not working, and instead it’s the owners of rental properties who are benefiting, said Gary Shilling, one of the economists who predicted the subprime mortgage crisis.

Shilling forecasts that rentals will continue to provide “attractive returns” for years to come, while the housing market continues to flounder.

In an opinion piece for Bloomberg, Shilling, the president of A. Gary Shilling & Co. and author of The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation, critiques three federal housing programs, charging “the administration hasn’t given up on its failed attempts to aid housing.”

He wrote in the third of a three-part opinion series for Bloomberg that Fannie Mae’s Home Affordable Modification Program (HAMP) is “hopeless.”

“The administration initially said this program would relieve 3 million to 4 million distressed homeowners, but it’s been a miserable failure,” he wrote.

That program, created by the Financial Stability Act of 2009, was intended to lower monthly mortgage payments for homeowners who have a financial hardship and are delinquent or in danger of falling behind.  The lower payments are calculated at 31 percent of the homeowners’ verified pre-tax income.

Shilling writes that through December 2011, 1.8 million HAMP trial modifications had been initiated, but the monthly pace of new modifications is dropping continually.  Shilling is also critical that only 43 percent of the HAMP trial modifications, or 762,839, made it to permanent status.

“Nevertheless, the administration still has hope for the program and has extended it through December 2012,” Shilling writes.

However, the Department of Housing and Urban Development’s (HUD) January scorecard indicates that more than 930,000 homeowners have received a HAMP permanent modification to date, saving an estimated $10.5 billion in monthly mortgage payments.

After six months in the program, more than 94 percent of homeowners remain in their permanent modification, the report states.  The scorecard also reports that 84 percent of homeowners entering HAMP in the past 18 months received a permanent modification, with an average trial period.

Whether or not the federal housing program is helping enough homeowners, rental prices continue to edge up.  The rent component of the consumer price index is rising, up 0.2 percent from January, and up by 2.4 percent from 12 months ago, the Bureau of Labor Statistics reported Feb. 17.

Copyright 2012 ABC News Radio


Investors Turn Foreclosed Homes into Affordable Rentals

ABC News (WASHINGTON) -- Turning foreclosures into rentals: Could this be a solution to the foreclosure crisis in America?

On Wednesday, the Obama administration announced it is soliciting ideas for ways to turn a half million foreclosed homes into affordable rental properties.

The Home Affordable Modification Program hopes it can be the ticket to boosting falling home prices and transforming thousands of government-owned foreclosures into homes with families.

Officials say they'll be listening for ideas until Sept 15.

Dayne Francis, an investor in Atlanta, said he has plenty to share. He and his family have bought eight foreclosed homes already this year for pennies on the dollar and transformed them into rentals. In June, they bought their latest foreclosure for $22,000. After $15,000 in upgrades, they expect to have the home rented to a family next week.

His sister-in-law, Candis Francis, the realtor of the family, said the family would buy up even more foreclosures, but getting loans is tough, and they usually pay cash. With better access to credit, she said, more investors would put "more skin in the game."

"If the government would get involved and offer more affordable finance options for investors, it will make things a lot easier," she said.

Dayne Francis, who runs the money end of the business, told us these new ideas "would probably take 50 to 75 percent of the properties off the market within a year or two, tops."

In addition to easier financing, experts say, the government could help by tweaking a few rules -- giving tax breaks to investors who can't collect enough in rent to pay the mortgage on their newly purchased foreclosed home.

There's talk of encouraging more investors to buy the homes of distressed families, allowing the family to remain in the home and charging them an affordable rent.

It worked for JR Klimach and his partner, John McKay.

They were struggling to pay an $1,100 mortgage. Then, an investor stepped in, paid cash for their home, and charged them $850 a month in rent.

Their investor, Rob Davidson, said that the foreclosure-to-rental solution is more than a smart economic decision.

"We've helped a lot of families," Davidson said. "You can't put a dollar value on what it does inside for you."

Someday, he'll make his money when he sells the home, he said, and he hopes to sell it back to Klimach and McKay.

However, critics worry the seemingly good ideas could lead to more absentee landlords who buy distressed homes and leave them in despair.

Nevertheless, some experts, including Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former chief economist to Vice President Joe Biden, said the solution could have a huge immediate impact on blighted neighborhoods.

"I wouldn't bet that this program is going to lead to big changes right away in national housing prices," said Bernstein. "But I do think that it will help in neighborhoods, particularly those with high concentration of foreclosed homes. If you could move some of those foreclosed properties off the residential market and into the rental market, that should slow the decline in housing prices in those areas."

Copyright 2011 ABC News Radio

ABC News Radio