Panel: Mortgage Program Failed Most Homeowners

Congressional panel says program has failed to help most homeowners

An auction signs sits in front of a foreclosed home Wednesday, Nov. 10, 2010 in Valrico, Fla. The number of U.S. homes repossessed by lenders last month fell by the sharpest margin this year, as several major lenders temporarily halted most or all of their foreclosures amid allegations thousands of foreclosures were handled improperly.

The Obama administration’s key program for modifying troubled mortgages has failed to help the vast majority of Americans facing foreclosure, according to the bipartisan Congressional Oversight Panel, which monitors the federal bank bailout program.

The report said that, if current trends continue, the Home Affordable Mortgage Program, or HAMP, “will never have the reach necessary to put an appreciable dent into the foreclosure process” — partly because it’s doing a poor job monitoring how lenders are handling troubled mortgages.

When the HAMP was launched two years ago, the administration said it would keep between 3 million and 4 million homes out of foreclosure.

But the oversight panel said it now seems likely that HAMP will prevent only 700,000 homes from going into foreclosure nationwide — a fraction of the 8 million to 13 million foreclosures expected by 2012.

In the meantime, foreclosures are slowing both nationwide and locally, but not because of HAMP. Instead, the slowdown came after regulators throughout all 50 states launched a probe into the way that banks are handling the foreclosure process, particularly their use of “robo-signers” who have pushed through thousands of foreclosures per week.

In San Diego County, the number of homes going into default dropped 3.7 percent between September and October and 21.6 percent since October 2009, according to mortgage tracker ForeclosureRadar.com. The number of homes entering foreclosure dropped 1.5 percent during the month and 13.4 percent during the year.

"Even before the recent robo-signing controversy, the lack of clarity around the foreclosure process had only created fear, uncertainty and doubt among buyers, leaving them to wonder, when, if ever, the millions of homes that are either delinquent or in foreclosure will hit the market," said ForeclosureRadar founder Sean O'Toole. "Now issues related to robo-signing and other foreclosure and lending practices have led some to call into question the validity of some foreclosures creating fear among buyers that the purchase of their home may later be deemed invalid."

In his blog ForeclosureTruth, O'Toole said he is not confident that most troubled borrowers will ever get real help.

"What they need most is a principal balance reduction sufficient enough to return their underwater homes back into a sensible investment....," he said. "Instead expect to continue to see more of the same – major programs that ultimately fail, as they are primarily designed as political theater rather than real help."

Source: Sign On San Diego