The Today Show aired a segment this morning in which Ann Curry questioned two of the show's real estate "experts" regarding the Obama administration's mortgage loan modification program. The numbers they quoted were grim: Out of 760,00 applications, only 30,00 have been approved. Their advice? One of the experts suggested the bootstrap theory for troubled homeowners, advising them not to expect government to help them out with their problems. The other was more succinct. She said that sometimes the only option is to "walk away".
It seems this latter comment is probably the one to take to heart. Ever since the government came out with the Making Home Affordable Program, it has been beset with problems. One big issue is that banks do not have to participate if they don't want to. Some of these banks, mind you, received TARP money (Well Fargo, Bank of America), yet feel no compelling need to give something back in the form of loan modifications. Considering that the government has set aside $75 billion to entice them, it makes you wonder why.
A big problem is that banks make more money when a property goes into foreclosure than by saving the loan. Ilyce Glink, of Tribune Media Services, frequently comments on this program and the myriad of reasons why it is not working. Last fall, she cited a report by the National Consumer Law Center that examined this issue in depth. They found that loan modifications cost servicers more than, for instance, letting homeowners take a "break" from loan payments while they get their financial house in order, or foreclosing on the loan. The report cites "a lack of third-party oversight" that could nudge lenders into modifying troubled loans rather than taking the easy, and most profitable, way to dispose of the problem. A lack of regulation of the mortgage industry is, apparently, mentioned more than once.
Until Congress gets to work overseeing the financial industry, we, both as homeowners and taxpayers will continue to suffer, while the big guys continue to stick it to us. Obama keeps saying he's going to do something about it. Let's hope it he actually does.
It seems this latter comment is probably the one to take to heart. Ever since the government came out with the Making Home Affordable Program, it has been beset with problems. One big issue is that banks do not have to participate if they don't want to. Some of these banks, mind you, received TARP money (Well Fargo, Bank of America), yet feel no compelling need to give something back in the form of loan modifications. Considering that the government has set aside $75 billion to entice them, it makes you wonder why.
A big problem is that banks make more money when a property goes into foreclosure than by saving the loan. Ilyce Glink, of Tribune Media Services, frequently comments on this program and the myriad of reasons why it is not working. Last fall, she cited a report by the National Consumer Law Center that examined this issue in depth. They found that loan modifications cost servicers more than, for instance, letting homeowners take a "break" from loan payments while they get their financial house in order, or foreclosing on the loan. The report cites "a lack of third-party oversight" that could nudge lenders into modifying troubled loans rather than taking the easy, and most profitable, way to dispose of the problem. A lack of regulation of the mortgage industry is, apparently, mentioned more than once.
Until Congress gets to work overseeing the financial industry, we, both as homeowners and taxpayers will continue to suffer, while the big guys continue to stick it to us. Obama keeps saying he's going to do something about it. Let's hope it he actually does.
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