The Obama administration’s flagship foreclosure aid program, HAMP (Home Affordable Modification Program), and HUD’s Neighborhood Stabilization Program (NSP) are both in congressional sites as the House Financial Services committee approved both the HAMP Termination Act (HR 839) and the NSP Termination Act (HR 861) yesterday[1]. The committee believes that ending these programs could save around $30 billion dollars of taxpayer money. Chairman of the committee, Spencer Bacchus (R-AL), hopes that the $30 billion can be used instead in the private sector to create jobs.
Not surprisingly, not everyone on Capitol Hill is pleased with the acts. Maxine Waters (D-CA), who has vocally blasted just about everyone on both sides of the aisle this month, announced that she is “very disappointed in my colleagues on the opposite side of the aisle [and] their mania to achieve fiscal austerity at all costs”[2]. Waters was instrumental in getting the Emergency Homeowners Relief Program – also on the chopping block – included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Of course, all of these negotiations could very well come to nothing, as yesterday the White House repeated that it will veto congressional government funding measures if the “undermine critical priorities or national security through funding levels or restrictions”[3]. The president has said repeatedly over the past few weeks that the termination of HAMP undermines his priorities and long-term economic growth.
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[1] http://www.dsnews.com/articles/house-committee-advances-bills-to-end-two-more-foreclosure-aid-programs-2011-03-09
[2] http://www.loansafe.org/congresswoman-waters-blasts-republicans-for-voting-to-dismantle-programs-that-help-homeowners-avoid-foreclosure
[3] http://voices.washingtonpost.com/2chambers/2011/03/obama_repeats_veto_threat_agai.html
Obama Administration In Line Of Fire From Congressional Oversight Panel
October 28th, 2010
What’s happening to the housing market right now is very reminiscent of what economist Milton Friedman once said, “The government solution to a problem is usually as bad as the problem.” At least that’s what a key government panel thinks. The Obama administration is now in hot water for allegedly failing in most housing-related issues.
The Congressional Oversight Panel, which is an independent and non-partisan commission conceived by the Congress, has been heatedly criticizing the government for its apparent inefficient handling of the foreclosure prevention program and the recent foreclosure fraud. To this, Treasury Department’s housing rescue chief Phyllis Caldwell – the administration’s representative – has refused to provide answers to the basic questions.
The housing market – and with that the economy in general – is facing a possible double dip as prices head south and the Federal Housing Finance Agency predicting a return of June 30, 2010 prices by 2013. Since a change in trend does not seem to be in the horizon, the Obama administration has been getting negative feedback on its attempts to make things better.
New Bill May Give Banks And Mortgage Processors Legal Cover For Improper Foreclosures
October 7th, 2010
Real estate watchers have heard of news of GMAC and JPMorgan Chase putting a halt on foreclosure proceedings. What they have not heard of is a bill – which has passed the Senate with lightning speed – that will make it harder to nullify improper foreclosure attempts by banks and mortgage processors. The bill, which is only getting media attention now, is already awaiting President Barack Obama’s signature.
The law, named “Interstate Recognition of Notarizations Act”, requires all state and federal courts to recognize as valid notarizations that were made in other states. Notarizations stamped en masse by computers, or electronic notarizations, are also included in this bill.
The bill had been sitting idle in the Senate Judiciary Committee for months but sped through approval and without public awareness on September 27. This made others question the timing of how it was acted upon; even the bill’s main sponsor, Republican Representative Robert Aderholt, was surprised at how it did not ignite any public debate.
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Obama’s HAMP: From Mortgage Relief To More Aggravation
September 1st, 2010
With a reported 616,000 homeowners being bumped from the Obama administration’s flagship Home Affordable Modification Program (HAMP), the supposed mortgage-relief program is said to be doomed for failure. And analysts are trying to dissect where it went wrong.
Brenda Reed, 64, from Lafayette is just one of the many who has pinned her hopes on HAMP. She said that the program only made her go through months of paperwork only to end up with more debt and a possible foreclosure.
HAMP was supposed to renegotiate delinquent mortgages and allow borrowers to hold on to their homes and stave off foreclosure. Those who enrolled in the program, though, said that HAMP only stringed them along for many months and prolonged the inevitable foreclosure.
HAMP, launched by the U.S. Treasury in March 2009, offered incentives to lenders that modify terms of mortgages on homes up for foreclosure. This seemed like a great deal for mortgage lenders as it warrants them safe from costs of foreclosures. This, however, is not always the case.
In July, only 422,000 trial modifications were escalated to permanent status and half as many were rejected from the program. This validates the complaint of most homeowners that HAMP does not resolve the problem but only prolongs the determined outcome of their problem.
General Accountability Office report on the Troubled Asset Relief Program (TARP) stated in July, “The number of trial and permanent modifications that have been cancelled substantially exceeds the number of homeowners helped. One continuing source of frustration is that the Treasury has rejected calls to announce publicly any goals or performance benchmarks for HAMP.”
House Minority Leader Says Republicans Are “Killing Jobs”
August 25th, 2010
House Minority leader John Boehner of Ohio lashed an attack on President Barack Obama and his allies during his Tuesday speech in Cleveland. He criticized the way the president has been handling economic affairs and called for the resignation of top economic advisers.
Boehner began his speech by demanding that Obama avoid the “job-killing tax hikes” that he’s been implementing. The Minority leader accused the administration that it is taxing half of the small businesses’ income with higher rates.
Furthermore, he also launched a tirade against the way the president is handling spending, tax, and regulatory policies. In his speech, Boehner said that Obama’s moves has done nothing but create uncertainties and stall economic growth. Because of this, he says that National Economic Council head Lawrence Summers and Treasury Secretary Timothy Geithner should be asked to step down from their posts.
The Democrats have given their own counter-arguments, even before Boehner made his speech. They say that the administration is not “killing” small business as only 97% are affected by the new tax policies. They further countered that if the current administration is encountering problems, it’s because it inherited an economic mess from the Republicans in January 2009. Whatever policies the current president is proposing to reverse the mess, the Republicans are blocking it, adds the Democrats.
The Republicans are recreating their strategy of 1994 – they are trying to get back to power by riding in the economic anxiety. They are seeking to get 39 seats in the fall elections to ensure that Boehner replaces current speaker Nancy Pelosi.
In February of last year, President Obama signed the economic stimulus law and it was recalculated at $814 billion over 10 years by the non-partisan Congressional Budget Office. Since the signing, Republicans and Democrats have fought over tax cuts and increases plus auto and bank bailouts. The impact of the new spending has also been debated over.
Republicans are clamoring for the roll back of some parts of the health care law. They are also saying ‘no’ to the energy bill, which will also tax carbon pollution.
The biggest debate is probably about the tax cuts made by President George W. Bush: the Republicans say that these should be extended but the Democrats think otherwise. The Democrats agree to extend only the tax cuts on middle class, with a 10-year cost of $3 trillion. The Republicans, though, are pushing for tax cuts for upper-income Americans – this will cost the government an additional $700 billion.
The coming elections will be affected by a number of things. Among them are the two wars, the Supreme Court picks, and the change in the nation’s health care system. But the biggest thing that will affect votes is economy.
Obama’s Mortgage-Relief Program Left By More Than Half Of Those Enrolled
August 24th, 2010
It seems like the Obama administration’s flagship program on mortgage-relief is failing. Those who were supposed to be helped by the program are falling out one-by-one. Nearly half of those enrolled have been kicked out.
The Treasury Department released a new report last Friday. It revealed that in July, around 630,000 homeowners – almost half of those who are enrolled – were cut loose from the programs. These homeowners were hoping that the program will help them have their monthly mortgage payments modified and lowered.
In the report, the Treasury Department suggests that more foreclosures are expected to happen in the latter part of 2010, hurting the supposedly recovering housing market. On the bright side, though, 32.3% - or 421,804 – of those who started with the program are now enjoying permanent loan modifications.
The banking industry says that the failure of the program can be blamed on borrowers who are not sending back paperwork. Borrowers, on the other hand, say that have been doing so but banks are just losing the documents.
Another reason for failing offered by the banks is that the administration urged them to sign up borrowers without checking any proof of income. The Obama officials came to the defense of the program, saying that they have never insisted on that kind of policy.
The administration also says that the program cannot be called a failure, with lenders now providing significant cuts to the monthly payments as compared to when the program was not yet launched. Even the largest mortgage companies are now offering alternatives to those homeowners who fell out of the program.
The Obama program, named Home Affordable Modification program, seeks to help those who are in the brink of foreclosure by lowering the monthly mortgage payments. Those who qualify for HAMP are granted interest rates as low as 2% for five years and longer repayment period.
Eight Banks Collapse Last Week As Questions Arise On FDIC’s Unique Handling Of A Chicago Bank Failure
August 24th, 2010
Eight banks were seized by the Federal Deposit Insurance Corp on Friday last week, pushing to 118 the total of bank failures this year so far and setting the stage for beating out the 140 failures registered by the regulator last year.
FDIC chair Sheila Bair told Bloomberg Television that the financial situation could prove to be far worst this year as the eight failed banks spread in Chicago, California, Florida and Virginia, would easily cost the federal regulator an estimated $473.5 million in deposit-insurance fund.
The most note-worthy of the closures was the ShoreBank Corp located in Chicago, which is reportedly affiliated with prominent officials of the Obama administration and maintains significant connections with notable investors such as Goldman Sachs among others.
Immediately after its closure by the FDIC, ShoreBank’s assets and deposits worth about $2.16 billion and $1.54 billion respectively, were turned over to a group of investors and assumed the new name Urban Partnership Bank, and headed by William Farrow, ShoreBank’s president and CEO at the time of the bank’s collapse.
Industry analysts said that the FDIC move was unique as its own regulations dictate that investors with more than 10 percent interests on a failed bank were automatically prohibited from bidding on its assets.
Atlanta banking lawyer Chip MacDonald called the FDIC-approved deal as highly unusual on its form.
A number of industry watchers were surprised that following a year of fierce efforts to shore up the beleaguered Chicago bank, the Obama administration eventually allowed its ‘demise’ but with a twist.
A source familiar with the deal revealed that ShoreBank has been effectively resurrected by a holding company largely comprised by Goldman Sachs, Morgan Stanley and Bank of America, all of whom by sheer coincidence have received some $400 million of federal funds to keep the bank alive and strutting.
Deducing from the FDIC statement on ShoreBank’s current standings on its assets and deposits, industry pundits said that the bank holds about 70 percent less of its face value and the group of investors currently managing it were actually collecting multimillion of federal funds in ensuring that the bank’s existing deposits were being serviced.
On top of that and according to a source privy to the ShoreBank-FDIC dealings, the bank’s auction was almost automatically awarded to Urban Partnership and the FDIC supported its decision by arguing that “it saved the FDIC’s insurance fund $250 million to $334 million over liquidation.”
Analyst Mike Shedlock characterized the whole process as fraught with glaring irregularities as he scored deliberate efforts to keep ShoreBank afloat at all cost no matter if irregularities marred its auction, its new management and the preference shown to giant US investors in taking over the failed bank.
New state-based efforts on helping the housing crisis and minimizing foreclosures are being implemented by the Obama administration. Though these efforts are yet to be tested, many are looking at them as better options as compared to the federal level programs on foreclosures.
The country has been hit by lots of economic bad news. Thursday reports an increase in unemployment rates as more and more unemployment insurance are being claimed; almost half a million more filed for insurance claims last week. The housing industry, where the financial crisis started out, is also not faring well.
The government has been trying to help the housing market but it seems the efforts are falling short. The number of Americans unable to hold on to their homes is continually increasing. Even home prices have failed to stabilize.
For the 17th month in a row, America saw more than 300,000 foreclosure filings in July. According marketer of foreclosed properties, RealtyTrac, these filings include bank repossessions, auction notices, and defaults. Last month alone, a total of 92,858 homes have been repossessed.
Because of a high number of repossessed homes being put up for sale, house prices are further declining and more borrowers are ending up underwater. An estimate by Moody’s Economy.com reveals that the number of lost homes this year will only decrease slightly from last year’s – from two million to 1.9 million.
Since the Obama administration launched its main program on home foreclosures over a year ago, only 398,198 loans were permanently modified. And only $321 million was spent of the $30 billion allocated for this purpose.
Why the low numbers? Banks, homeowners, lenders, and the government are pointing fingers.
The homeowners applying with their banks or a mortgage service company say that procedures are too confusing and paperwork is being lost. Banks, on the other hand, complain that the government keeps on changing the rules. The government is looking at the banks and accusing them of poor customer service.
The programs’ inspector general says the Treasury Department can also be faulted. He says the reason that the program has not made any remarkable dent in the foreclosure filings is that clear goals and benchmarks were not set.
Many say that the only real solution to the housing crisis is to urge the banks to lower the principal loan balance instead of loan modification. But since banks are iffy because this will incur more losses for them, the Treasury fears that pushing them to do so might just give them reason to pull out of the program. In the end, no push for such solution was done.
Currently, state-based efforts are helping the unemployed and the underwater borrowers in 18 states as well as the District of Columbia. A total of 140,000 borrowers are expected to be aided by the $2 billion allocated for such state-based programs.
Though these state programs may most likely grant more cash assistance than loan modifications, there is doubt that they will be able to push for principal reductions. Many though are looking closely at these programs and crossing fingers that they will make better progress on the housing crisis than the federal level programs.