The Obama administration says the foreclosure freezing is not going to help the housing market in finding the path to recovery. And people have a reason to be worried: the mess has already tipped the bank balance sheets and created chaos in the housing market. Some real estate analysts contend that all hope may not be lost: the pause in foreclosures just might give everyone a chance to rethink strategies and present better options for the housing market.
When the economy came into distress and led to the real estate market crash, the response was three-fold: banks and auto bailouts, stimulus, and aid for homeowners facing foreclosures. The first fold worked pretty well and the stimulus, though small, did whatever it promised to do. The help was the one that proved disastrous.
The help, dubbed the Home Affordable Modification Program, has been controversial in that it has not proven successful in helping homeowners stay in their homes. A voluntary program that gives homeowners a three-month trial modified mortgage terms, HAMP is supposed to transition into permanent modification in exchange for some federal money. But many homeowners who have enrolled in the program were either kicked out after three months or left in limbo for many months.
While the government focused on HAMP, the country is on its way to set a new record on foreclosure numbers. Another foreclosure numbers record is said to be seen for 2011. This is why some argue that freezing on foreclosure just might be a positive thing.
While banks put foreclosure on standby, the administration and industry insiders can come up with better strategies to help the housing industry. In fact, four new ideas have been making its circulation in the industry.
First of these ideas is repairing HAMP. Analysts argue that leaving the decision to extend a mortgage modification to banks will not work – the banks, after all, are not interested in doing mortgage modification. For HAMP to work, more streamlined guidelines should be set.
Cramdown is another suggestion being made. The lack of a cramdown when HAMP was implemented was what led to the program’s failure. A cramdown will empower a bankruptcy judge to modify the principal on mortgages.
Third on the suggested remedies is mandatory mediation. This will hit two birds with one stone: not only will it correct most of the paperwork mess the market is facing, it will also allow homeowners to stay in their homes. Heeding this suggestion will require banks to sit in with homeowners to check on the foreclosure papers and come up with possible alternatives to foreclosures.
Last in the list of suggestions is right-to-rent. After facing foreclosures, homeowners will be offered the option to stay in their homes through rental at fair-market value for five years.
These are good suggestions. Whether all or even one will make its way to implementation, everyone should just wait and see.
More guidelines are worthless since the Banks are ignoring them now, losing paperwork submitted zillions of times and doing all they can to foreclose since that is how they make the most profit. For most 1sts the taxpayer takes the loss via the GSE’s the banks just make more profits.
There needs to be a HAMP LAW. The “directives” that are part of the signed participation agreements forced on most banks under TARP, have no way to be enforced. And the banks are laughing all the way to the..banks.
Treasury/Obama did all they could in 2009 sending in the SWAT teams to the banks, trying to shame the banks to do more modification by the required Treasury reports etc.
In 3 Congressional subcommittee hearings now it is clear. The Republicans want to kill HAMP entirely since they say the banks are doing such a great job and don’t need any government intervention.
So the banks keep making billions by all the fees they get by foreclosing and the crisis continues with the losses going to the taxpayers on 80%? that are GSE backed.
Then the banks lies and blame it on the homeowner who has often made 6-9 months of trail payments has sent the same paperwork in zillions of times always to be “lost” and then the banks blame the homeowner. In Congressional hearings even Congress folks have sent paperwork from Congressional fax machines many times to be “lost” by the banks so they have an false excuse to foreclose and make their profits.