Housing Update: WSJ: Obama Housing Plan spends $42.5 Billion to modify 2 million mortgages?! Huh?

Update: Diana Olick reviews the TARP watchdog report and concurs with MiM, esp note the number of principal reductions out of 500,000 loans, it flies in the face of the claims by Treasury and the Office of the Comptroller that lenders were reducing principal:

(…) they did get a look at some data I’ve been unable to find, and that is that under HAMP only five, yes five, modifications of the half million involved principal forgiveness. There’s your headline. Treasury officials issued a polite retort, admitting that “the housing crisis was never going to be fixed overnight,” and that “While HAMP is open to the unemployed, we continue to study further ways to help unemployed homeowners,” but still, of course, they defended the program.

This appears to date to be just a total ripoff. The banks get 42.5 BILLION to modify 2 MILLION mortgages? Are you frakkin kidding me? We could BUY the houses IN FULL and have how much left over?! What a ripoff. And the TARP Treasury Watchdog Panel agrees:

WSJ:

The Obama administration’s loan modification effort is ill-suited to tackle the causes of the foreclosure crisis, financial rescue watchdogs concluded in a new report.The foreclosure crisis has shifted from being driven by exploding subprime mortgages to defaults on prime mortgages, many of them caused by job losses, two of the three members of the Troubled Asset Relief Program’s Congressional Oversight Panel concluded.

Meanwhile, the Home Affordable Modification Program, or HAMP, wasn’t designed to address these problems, nor is it geared towards averting a looming wave of foreclosures caused by resetting option adjustable-rate mortgages, they wrote.

“It increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” the report, released early Friday, concluded.

But as we noted the other day, Treasury just gave the HAMP a glowing status update, what does the TARP watchdog say about that?

“The foreclosure crisis began with home flippers, speculators, reach borrowers who purchased or refinanced properties with very little money down and non-traditional mortgage products, and homeowners who were sold subprime refinancings,” the watchdogs wrote.

“Increasingly, however, because of the severity of the recession, declines in home prices, and the persistence of job losses, foreclosures involve” families who paid sizeable down payments and took out conventional loans, they continued.

According to the report, Treasury estimates it will spend about $42.5 billion of the $50 billion of TARP funds devoted to foreclosure mitigation. That will support about 2 million to 2.6 million modifications, the report said.

The watchdogs found that HAMP loan modifications completed so far were achieved almost exclusively through interest rate reductions. “Principal forbearance was rare and principal forgiveness rarer still,” they wrote. Lenders deferred principal in just 261 cases and forgave principal in only five, the report said.

About that NPV model Treasury is using in HAMP and which they WILL NOT MAKE PUBLIC:

The report also criticized Treasury for failing to provide enough detailed data about the program, saying it hoped Treasury would release more information on a regular basis.

It also took issue with Treasury’s refusal to make public the net present value model that determines eligibility for the program. Without access to the model, borrowers can’t determine whether they were unfairly denied a loan modification and housing counselors are hamstrung in helping borrowers with negotiations, the watchdogs wrote.

Yeah how about that Timmeh? Sheila Bair made her FDIC NPV values public when she did the workouts for IndyMAC….

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October 9, 2009. Tags: , , , , , , , , , . Economy, FDIC, Finance, Foreclosures, Housing, Obama Administration, Popular Culture, TARP, Unemployment Statistics, Wall St.

2 Comments

  1. Housing Update: Fannie Mae rolls out ‘Deed for Lease’ program renting foreclosed homes to owners… « Moderate in the Middle replied:

    […] a successful way (we were behind a HOLC under which we would have paid for these houses ONCE, also see here the TARP oversight panel’s review of MakingHomeAffordable) further action is […]

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  2. Housing Update: All About Fannie Mae- Delinquency rate explodes, book of business now at $3.242 trillion « Moderate in the Middle replied:

    […] way to spend money in housing when FAN FRED defaults are rising this way? Good Gawd Almighty. The Tarp Congressional Oversight Panel agrees, the Treasury housing plan IS NOT WORKING. The [Fannie Mae] “seriously […]

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