Posted on August - 20 - 2010
HAMP has hardly made a dent in the foreclosure debacle
The grim foreclosure reaper is grinding on across the length and breadth of America, harvesting the wealth of an increasing number of families and spewing out their dreams. The news is chilling on many other economic fronts too. This includes the report last Thursday that first unemployment claims have reached 500,000 in the face of criticism that Washington is not doing nearly enough to control the situation.
Last month (for the 17th month in the row), the total of default and auction notices, and bank repossessions totaled over 300,000. The main player here is the actual repossessions, which have surged recently, hitting almost 93,000 homes during that month too. More foreclosed houses on sale means more imbalance between supply and demand, and lower median property prices. Falling property prices increase the number of underwater borrowers. It just takes a further rise in unemployment and the whole vicious cycle kicks in again. Industry analysts are now estimating that 1.9 million American families will lose their homes and fortunes this year. That is a scant improvement of 100,000 over 2009 and not much to improve the reputation of Obama’s HAMP.
There is compelling evidence regarding the ineffectiveness of HAMP. Acceptably large numbers of homes are not becoming affordable, despite what the Treasury Department says. The almost 400,000 mortgages modified over the past eighteen months are paltry when compared with a forecast 3.9 million foreclosures for 2009 and 2010.
To make things even more depressing, officials have managed to spend just $321 million of the $30 billion granted. Stakeholder complaints center on administrative issues. Homeowners complain that bank procedures are confusing and that a lot of the paperwork has gone missing. Lenders complain about moving targets in terms of changing rules. Washington complains that the banks that caused the economic wobble are not interested in sorting their mess out – when in mercy’s name will the buck stop somewhere?
The banks do have a point though. The law requires financial institutions to maintain tight controls, and that includes putting new procedures into place and re-training staff. The Inspector General seemed to agree with lenders when he recently criticized the Treasury Department for failing to set benchmarks and clear goals for HAMP. But then so also does Obama have a point. Banks are definitely less than interested in finding ways to lose money, and if pushed to hard have the option to retire from the Treasury project.
Perhaps the new initiatives to provide direct aid to individually troubled homeowners will make a difference. Let us hope that it does so, for America is in desperate need of hope. There is real value in bank inventories. Find foreclosed residential real estate at .
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