Watchdog Panel Slams Loan Mod Program: ‘Little More Than Window Dressing’
One of the government's bailout watchdogs, the Congressional Oversight Panel, has some sharp words for the Obama administration's programs to fight forclosures through loan modifications. In a report released today (PDF), the panel said the programs "have failed to provide meaningful relief" and appear to be "little more than window dressing" when it comes to helping desperate homeowners.
The report also raised concerns about the scope of the programs, pointing out that even though the Treasury's stated goal was to offer three to four million loan modifications, the number of borrowers eligible for permanent modifications falls far short of that goal. (Homeowners in the program first get trial loan-mods designed to last three months, after which they're which banks and mortgage servicers are supposed to either give homeowners a permanent modification or drop them from the program.)
As we've reported, the Treasury has hedged its statements, saying that the 'three to four million' figure was for trial modification offers, and not permanent loan modifications. Its latest estimates are that it will be able to offer permanent help to, at most, 1.7 million homeowners. The panel's estimates are even lower. It predicts that only one million families will receive permanent loan modifications through the Treasury's programs, despite there being six million families more than 60 days behind on their mortgage payments.
"Doubt then emerges as to the attainability of Treasury’s goal," according to the panel's report, "as the scope of borrowers even eligible is roughly half of the target."
The Treasury, in response to the report, continued to downplay expectations.
"As we have said before, these programs are not intended to help every homeowner in trouble," said Treasury spokeswoman Meg Reilly. "We cannot help those who simply bought a home that they could not afford."
But even with the narrower focus, the program is still being executed slowly and ineffectively, according to the panel.
According to numbers released by the Treasury today (PDF), more than 230,000 homeowners have received permanent loan modifications. But by our own calculations, in February, about 475,000 of homeowners have been stuck in the trial modification stage--past the three-month mark for when a final decision on the modification should be reached. Problems with lagging modifications were so common, we offered to match struggling homeowners with reporters looking to tell their stories.
"Quite frankly," the oversight panel's chairwoman, Elizabeth Warren, told Marketplace, "we're concerned that dealing with mortgage foreclosure has simply not been a priority."
Get Updates
Our Hottest Stories
- Donations to Scott Walker Flagged as Potential Fraud
- In Race For Better Cell Service, Men Who Climb Towers Pay With Their Lives
- Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds
- Pardon Attorney Torpedoes Plea for Presidential Mercy
- Patient Died at New York VA Hospital After Alarm Was Ignored
- Finding Oscar: Massacre, Memory and Justice in Guatemala
- Introducing the ProPublica Patient Harm Community on Facebook
- Built for a Simpler Era, OSHA Struggles When Tower Climbers Die
- Got Student Loans? Share Your Documents With Us
- Remember Stuxnet? Why the U.S. is Still Vulnerable
- Donations to Scott Walker Flagged as Potential Fraud
- Pardon Attorney Torpedoes Plea for Presidential Mercy
- In Race For Better Cell Service, Men Who Climb Towers Pay With Their Lives
- Air Force Pilots Balk at Flying the World’s Most Expensive Fighter Jet
- Watchdog Group Calls for Probe of Lobbyists Behind Congressional Trip to Taiwan
- Patient Died at New York VA Hospital After Alarm Was Ignored
- Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds
- Broadcasters Sue to...Block Transparency
- Happy Graduation! Here's The Best, Most Depressing Journalism on Student Debt
- Remember Stuxnet? Why the U.S. is Still Vulnerable
3 comments
Thom Barnes
April 14, 2010, 8:05 p.m.
I have to say that I am glad this program has not progressed as many thought it would. There are far, far more folks out there that should never have been given a home loan because they simply did not qualify for the loan to begin with. I would bet that most of them that are expecting a hand out now still do not qualify for the loan they are hoping to get in order to stay in a house they cannot afford.
A Brady
April 14, 2010, 9:25 p.m.
I have really enjoyed all of the interviews and appearances that Ms. Warren has done—she tells it like it is!
RERM
April 15, 2010, 7:01 p.m.
Mr. Barnes, your ignorance of the problem facing this country in the real estate market is astonishing. The speculators and low credit quality mortgage holders were the first to go back in ‘08 and early ‘09. These days you have people whose incomes have, in some cases, halved, through no fault of their own (for fault, look to the incestuous relationship between Washington and Wall Street).
Ex: Go down to your local Citibank branch, ask the local banker if his or her income has gone down in half to what it was over the last 5 years. Their pay gets cut even though The Bank (the retail entity known to millions) made money (and indeed, increased it’s income over the last 3 years), however the geniuses in Wall Street took it to bankruptcy (Citi is bankrupt, only the taxpayer bailouts keep it afloat) and paid themselves millions for their efforts.
Where is Mr. Pandit’s (and more to the point, Mr. Prince’s) duty to the shareholders and employees to properly evaluate the risk the enterprise takes???
What about the Board???
Rubin gets 39 million for a part time job “advising” the bank on risk management and then claims that no one could see it coming???
What about the Risk Management comitte???
what about the fact that Citi paid Pandit $800 million for his company and in ONE YEAR he shut it down and wrote it off for $200 million???
Where is the shareholder protection???
People who are affected now on their mortgages should get no bailout???
Why should Mr Pandit, Mr. Prince, Mr. Rubin, Mr. Banga…get a pass???
Moral Risk???
What morality???
The same story is repeated at Bank of America, Wells Fargo, Lehman Bros., Countrywide, Merrill Lynch, Morgan Stanley, Wachovia, World Savings Bank, Goldman (if you think they would’ve survived without Uncle Sam, dream on), AIG, Lincoln Life, the Hartford ...and on… and on…
So, who bails them out…More bankers!!! it’s okay for the average American to feel the full !!pain of true capitalism, but God Forbid, Wall Street should feel it!!!
I know several people whose incomes have come down by over 50%, their not jobless, they didn’t buy unusual gimick loans, they put a down payment of over 15%, their fixed monthly payment was under 30% of their monthly income (standard financial planning recomendation for a mortgage payment was under 35%) they find themselves looking for a loan mod.
Bottom line, the US goverment should either bail no one out or should bail everyone out (Fannie and Freddie could’ve used the trillion dollars being spent on bailouts and should’ve bought up every mortage issued in the US between Jan ‘06 and Dec ‘08, refied everyone with a job and foreclosed on the rest).
This would’ve, and could’ve been fairier, it also would’ve helped out the Real Estate market by setting a bottom on the prices in many neighborhoods.
Think about it.
Commenting on this story is closed.