St Louis Mortgage Owners Confronted With Ongoing HAMP Failings
In an anticipated yet disturbing announcement
, Amherst Securities Group LP's Laurie Goodman told Congress that the U.S. loan modification program called HAMP (Home Affordable Modification Program) is "destined to fail" because it doesn't confront the real problem of negative home equity that is driving foreclosures nationwide.
This is definitely bad news for St. Louis mortgage owners who are themselves dealing with a less than stellar real estate market notably in the once fast growing suburbs and outlying affluent counties of St. Louis, Missouri. Sales are minimal; prices have fallen.
But again, this really doesn't come as a total surprise. Call to mind present statistics from government and mortgage industry data showing that the three-year housing slump has wiped at least 28 percent off home values nationwide.
In fact, according to First American Core Logic, a real-estate data company in Santa Ana, California, approximately 23 percent of homeowners in the third quarter owed more than their properties are worth.
"The phenomenon of underwater mortgages is one of the most troubling aspects of the entire housing market collapse," Julia Gordon, senior policy counsel at the Center for Responsible Lending, told the committee.
She goes on to say: "Homeowner equity position has emerged as a key predictor of loan modification re-default, more so than unemployment or other facts." It seems impending that this uncalculated facet needs speedy undertaking by politicians and bankers.
Reports have been saying that 1.5 million of the 3.2 million homeowners targeted by the Obama administration for mortgage relief are likely to qualify for the Home Affordable Modification Program. But this hasn't been the case.
Bank of America contends that the government's estimate of the number of homeowners who will be able to modify their mortgages is far too large and unrealistic.
While the Treasury Department has been reporting that Bank of America has more than one million borrowers who are behind on their home loans and eligible for the Obama Administration's Making Home Affordable loan modifications, the number of "truly eligible" borrowers is just 340,000.
Bankers and lending industry reps acknowledge they need to do better, but say there are plenty of modification success stories that don't get media or government attention.
This however has not diminished the overall plan in preventing any further loss of homes on such a large scale to this foreclosure pandemic.
Banks have said they are rushing to meet a new deadline announced by the Treasury on November 30, 2009 to permanently convert more than half of the 650,994 loans that were in trial modifications at the end of October into permanent reductions by year's end.
As of November 30, 2009, only 4.3 percent of active loan modifications granted by banks under the federal Making Home Affordable Program had been made permanent - a total of just 31,382 loans nationwide. This grim truth is but another testament to this "sinking ship" scenario facing this country.
And even though the St. Louis real estate market has not taken the debilitating hit that foreclosure ridden states have taken in California, Florida, and Nevada, it has none-the-less hindered the purchase and refinancing market bringing it to a paralytic stalemate as attested to by numerous local St Louis mortgage brokers and lenders.
The lofty goal of this administration's home saving program, unveiled in early 2009, had aimed to produce mortgage modifications for 3 million to 4 million homeowners within three years. It's sad to report that this grand endeavor appears to be another miserable blunder that needs an immediate over-haul on Capitol Hill.
So, in an effort to streamline this extraordinary undertaking, a mortgage "cram-down" bill that stalled in Congress earlier this year will also be attached to the broader financial regulatory legislation and voted on in December 2009.
The cram-down provision would let federal judges lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court, even if the lender objects to this assistance.
Under current measures, bankruptcy judges are allowed to alter loan terms on vacation homes or investment properties. It's interesting to note that primary residences used to be eligible for this before Congress rewrote bankruptcy laws in 2005.
But the banking industry is anything but in favor of this new legislation. "Enacting cram-down legislation would make things worse by adding even more risk to the mortgage market," the Mortgage Bankers Association, Financial Services Roundtable and eight other trade associations said.
"The massive potential losses generated by judicial modification will directly impact Fannie Mae, Freddie Mac and the government mortgage guarantee agencies, and could well reverse recent gains in credit sector growth."
Only time will tell as to the eventuality of HAMP and how any future changes will help or ultimately destroy families financially especially those who will face the next wave of foreclosures coming in 2010 and 2011.
And this is not taking into consideration the believed insurmountable blow this economy may face with the emergence of the commercial real estate foreclosure debacle brewing on the horizon.
Since this article was written, there has been an update on the "Cram-Down" Bill. The attempt to include judge ordered cram-downs in the financial regulatory reform bill failed in Washington as voted on in December, 2009.
In what is being called a serious blow to the American homeowner, the House voted 214-188 to reject an effort to expand a Wall Street regulation bill with mortgage relief that would let debt-ridden homeowners reduce their payments in bankruptcy court.
The provision would have revived a previous bill that passed the House but later failed in the Senate some months ago.
Democrats hoped that by inserting the provision in the regulatory legislation they would have had another opportunity to make it law. Aiding homeowners through bankruptcy had been a key feature of President Barack Obama's foreclosure fighting proposal.
Over the past few months, banks and credit unions have relentlessly lobbied against the bankruptcy measure and did so successfully. They said it would force a great flood of bankruptcy filings and ultimately drive up mortgage rates.
Consequently, St. Louis mortgage owners who are barely staying "afloat," those who are "underwater" as far as home values are concerned and any consumers facing imminent foreclosure will have to wait patiently and see what happens in the coming months.
St Louis Mortgage Owners Confronted With Ongoing HAMP Failings
By: Floyd J. Tapia
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