Federal Foreclosure Mitigation Programs to be Axed
Four federal programs that were created to help troubled homeowners escape the foreclosure ax are on the endangered list this week. Included are HAMP, the FHA’s short refinance program, HUD’s Neighborhood Stabilization Program and the Emergency Homeowner Relief Fund.
While created with good intentions of helping millions of borrowers, these programs in reality have all failed to make a dent in the plight of the distressed borrower on a grand scale. Reports show that many borrowers no longer even contact counseling services set up to assist with help under these programs. One member of the House Financial Services Committee, which has called a hearing for March 2 to review these programs, opined that the programs have actually done more harm than good.
The main argument against the above programs is their cost, which is translated to the tax payers. The cost of helping just one homeowner can be so astronomical that it just doesn’t make sense. Often things created in haste that are not well thought-out can have this result, and unfortunately in this case the backlash is that the housing market cannot recover in such circumstances.
In lieu of federal programs to help underwater and troubled borrowers, the slack will be left to individual lenders and states to come up with programs that will realistically aid borrowers. California has jumped into the proverbial boat first with Keep Your Home California, a program that packs a lot of punch and sounds promising. Pennsylvania has a successful program that provides assistance to unemployed homeowners. The proof will be in the pudding, and lenders will need to cooperate in order to help with recovery efforts. Inevitably other states will need to formulate programs as well, so eyes will be on the California guinea pig.
The bottom line is that the market cannot recover unless there is cooperation from the lenders. Short sales need to be streamlined and loan modifications need to be considered for those who qualify, and with time restraints. It does justice for no one–the borrower, the lender, the housing market, the neighbors of the homes in question–to draw out these processes. We need to help those who need it, and provide them with alternatives. We don’t just need band aids folks, we need hard labor to build back our markets.