The Obama administration’s effort to help homeowners avoid foreclosure may not achieve its goal of helping 3 million to 4 million borrowers and may simply delay mortgage defaults for many, a government watchdog group says.
The Congressional Oversight Panel, charged with making regular assessments of the $700 billion financial rescue fund enacted last year, said the Treasury Department should consider whether to improve the current $50 billion program or adopt new programs to meet an expected rise in foreclosures fed by increased unemployment.
The panel’s report is scheduled to be made public Friday.
It comes a day after the Treasury said its mortgage relief effort has helped 500,000 homeowners and that it was still on track to help up to 4 million homeowners within three years.
“We’ve put significant pressure on servicers to ramp up their efforts,” said Housing Secretary Shaun Donovan. “We’re holding them to higher performance standards.”
But the oversight panel, chaired by Harvard law professor Elizabeth Warren, concluded that the foreclosure crisis has now moved beyond the subprime mortgage market that ensnared many homeowners, particularly low-income families. The program, the report states, was not designed to deal with foreclosures caused by unemployment.