Do you remember my article in December 2009…New Math Equation: HAMP + HARP + TARP = DUD? Well I guess I did not use strong enough words. I am not even sure abysmal is strong enough. Complete failure…utter disaster…absolute waste of a few hundred billion dollars! Anyway you slice it, a permanent loan modification under President Obama’s nearly year-old program to stem home foreclosures has been a horrific failure. So bad that I believe we may have been better off with out any bailout programs and saved tax payers hundreds of billions of dollars. So how bad is it?
Florida ranks third in the nation for foreclosures and has over 1 and 6 homeowners currently in default we have put hundreds of billions of dollars to good use and have successfully completed a whopping 8,405 mortgage modifications! Nationwide we have done 66,465 permanent mortgage modifications less than 2% of the total loans that are past 60 days delinquent. I personally know of only two people that have actually received a mortgage modification.
The dismal performance of the program marketed as a helping hand for the nation’s more than 3.3 million delinquent home loans was released last Friday in a Treasury Department progress report.
Throughout Florida, which by every measure is one of the states hardest hit by the real estate crash, there are 8,405 permanent modifications. In Palm Beach, Broward and Miami-Dade counties combined there are 2,987 permanent modifications.
Another 96,703 Florida loans are on trial modifications.
The Making Homes Affordable program gives incentives to banks to modify loans in three basic ways; reducing interest rates to as low as 2 percent, increasing the life of the loan, and reducing the principal owed on the loan.
“You keep hearing about this wonderful program the government is doing but it’s not working,” said Joel Bienvenu, who owns a home west of Boca Raton and has been trying to get a loan modification through Wells Fargo since August. “I keep getting excuses that they are just overwhelmed.”
Nationwide, 66,465 permanent modifications have been approved, less than 2 percent of the total loans that are 60 or more days delinquent. Another 46,056 permanent modifications have been approved by the lender, but not yet by the borrower.
The median monthly decrease to mortgages that received permanent modifications was $516, according to the Treasury Department.
From the beginning of the program, homeowners have complained about having to send lenders the same paperwork multiple times, while banks say borrowers provide the wrong documents or fail to meet the requirements for the permanent modification.
Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said Friday that lenders have been on a learning curve, but are improving.
“I think the industry is working hard,” he said. “You can’t ramp up a program like this overnight.”
Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson said the more than 1.1 million trial modifications offered to borrowers nationwide shows lenders are making an effort.
The fact that just 66,465 have become permanent points to a fundamental problem with the program, she said.
“The program itself is a failure,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “It’s trying to put a square peg in a round hole.”
To qualify for a modification, a person’s monthly housing expenses must be more than 31 percent of gross monthly income. But you also must prove that you can pay for the modification.
Olefson believes high unemployment and a steep loss in housing equity is keeping the plan from working.
“The whole program was crafted before we correctly identified the problem,” she said.