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Somebody needs to foreclose on the government’s foreclosure program

By The Associated Press
December 14, 2010

The Obama administration‘s central foreclosure-prevention effort won’t reach its original goals and the government should come up with clear, measurable objectives for the two-year-old program, according to a new report from a congressional watchdog.

Because the Treasury Department has failed to properly analyze the program it runs, it is nearly impossible for overseers and the public to determine whether it is a success, the Congressional Oversight Panel said in a report issued Tuesday.

The main Obama plan was designed to help people in financial trouble by lowering their monthly mortgage payments. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. The homeowners receive temporary modifications that are supposed to become permanent after borrowers make three payments on time and complete the required paperwork.

The oversight panel’s report poses questions to the government: How many foreclosures was the program, called the Home Affordable Modification Program, or HAMP, intended to prevent? What percentage of temporary home-loan modifications were intended to be made permanent?

Although the program has succeeded in preventing “some number” of foreclosures, in its current form it “will never have the reach necessary to put an appreciable dent into the foreclosure crisis,” the report says.

It notes that Treasury’s original goal of preventing 3 million to 4 million foreclosures has been reduced several times. The oversight panel estimates that the program will prevent some 700,000 to 800,000 struggling borrowers from losing their homes — compared with 8 million to 13 million foreclosures expected by 2012.

Treasury has the authority to spend up to $30 billion in taxpayer funds on the program. Only about $4 billion likely will be spent, according to the panel.

“We believe Treasury should come forward with what they think the real objectives of the program are right now,” Sen. Ted Kaufman, D-Del., the panel’s chairman, said in a conference call with reporters on Monday.

The report also says Treasury should hold banks that administer mortgages accountable for failing to complete loan modifications properly by, for example, losing paperwork. The department should be more willing to use its power to withhold or take back incentive payments to the banks in those cases, it says. The payments are made after permanent modifications are achieved and are spread over five years.

Kaufman said the HAMP program hasn’t failed. Rather, he said, “I think the program has just turned out to be a lot smaller and have a lot less impact on the housing market than we thought it should have.”

Tim Massad, Treasury’s acting assistant secretary for financial stability, said that while the number of permanent modifications won’t meet the original goal, the government has set a new standard for the industry as the program has been widely imitated in the private sector.

The number of loan modifications made outside the government program has exceeded those in it, according to data compiled by bank regulators.

The average homeowner in the program is saving $500 a month on mortgage payments, Massad said in a separate conference call Monday.

The program has helped “alleviate the worst housing crisis that we have seen in decades,” he said.

The report also recommends that Treasury enable borrowers to apply for loan modifications online, and to monitor cases and intervene when borrowers fall behind on their payments on modified mortgages.

The panel was created by Congress to oversee Treasury’s $700 billion rescue program that came in at the peak of the financial crisis in the fall of 2008. Of the total, $75 billion was earmarked for mortgage assistance programs, including HAMP.

Copyright © 2010 The Assoicated Press

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7 Responses to Somebody needs to foreclose on the government’s foreclosure program

  1. sherry

    December 14, 2010 at 10:28 pm

    I have known a few people who have attempted to restructure their mortgage.
    Not a single one has been helped.

    • Carl Nemo

      December 15, 2010 at 2:36 am

      Thanks Sherry for your comments. You are correct. The mortgage companies are stalling and double-talking their repo victims. The victims are worth nothing to them, but the reacquistion of properties to be resold at whatever price is far more lucrative to the bank then working with the debtor.

      They’ve already been “bled white”, being dupes holding the in arrears mortgage notes who are surely not stakeholders, due to the effects of compound interest. The lender has made a killing while the growth in equity has been zero to boucoup negative.

      Mortgage restructuring is a dead end avenue. The best bet is for folks is to feign cooperation, filling out the paperwork, while “not” sending in “any” futher payments. Keep the premises in good shape and build your cash position. Some folks are still in their homes post two years after the housing meltdown. Following my reco you’ll have a fat cash position to rent with as short a lease as possible. It’s far better than owning in these times.

      Carl Nemo **==

      • Guardhouse Lawyer

        December 15, 2010 at 9:09 pm

        “. The victims are worth nothing to them, but the reacquistion of properties to be resold at whatever price is far more lucrative to the bank then working with the debtor.”

        Banks are not in business to buy and sell real estate. They are in business to rent out money. Foreclosing on a house that has a $200,000 balance on it and selling it for $150,000 is a losing proposition for the bank.

        I believe your statement is wrong and request that you provide some source for it.

        • Carl Nemo

          December 15, 2010 at 9:59 pm

          Hi GHL,

          Your answer in short is:

          M = P( 1 + i )n

          M is the final amount including the principal.

          P is the principal amount.

          i is the rate of interest per year.

          n is the number of years invested.

          Compound interest although a reality when it comes to ‘loans’ is also usurious in terms of function. They once asked Albert Einstein at one of his open lectures at Princeton where they could ask him whatever they cared to. The question: What is the greatest mathematical invention of all time…he dryly said “compound interest”…which of course caused laughter in the audience.

          Banks are predators, regardless of an apologia that they only “rent money” ; ie., lend money. During the ramp up to the 2008 real estate/insurance debacle they were all in cahoots; ie., the local bankers, the appraisers and the real estate industry pushing properties on folks that obviously could not service the mortgages in the long run. So properties that were appraised for $500,000 in Cali and other areas throughout the nation were in actuality more fairly valued at half as much, but the feeding frenzy brought on by ‘flippers’ along with the aforementioned cabal of players pitched them ‘chum’ ; ie., easy money ended up in disaster.

          When a young, unwitting couple purchase a home and foolishly sign on the dotted line for a $1500 per month 30 year mortgage with the illusion they are ‘buying” anything other than trouble is tantamount to criminality. Someone needed to explain to them that $1490.99 of the payment went for interest with them being nothing but lifetime ‘renters’ to the bank except in the last 10 years of the mortgage note when the principal starts to exceed the interest factor. The rub was the false promise that real estate would go up forever and you best get in on the action now or you’ll miss the opportunity for ever. Yeah, I know about the mortgage interest right off ‘advantages”, but to me its questionable when a couple is pitching out a handsome sum annually to the banks in the form compound interest only being compensated at a percentage on these dollars etc. while still only ‘saving’ about $120 or whatever in the equity towards the ownership of their home.

          Using the “Rule of 72’s” if one divides the interest rate into the number 72 they will come up with the time it will take for the principal amount to increase in the lenders favor. So if said couple has a 4% loan, then divide that into 72 you come up with a resultant of 18 years. So in the first 18 years you’ll have paid double for the house and if they continued to pay for the entire 30 years another almost doubling again. So they would pay 350% for their $250,000 home. Are the banks cutting a ‘fat hog’ or what?

          The rest is an ugly history of unscrupulous banking, appraising and corrupt cheerleaders in the real estate sector that finally caused another Fed sponsored “bubble” to burst. I rest my case.

          The banks never lose…period! We the borrowers always lose especially when the deck is stacked against us due to compound interest. Yes its the reality of doing business, but a cruel one at that. : |

          Carl Nemo **==

          • Guardhouse Lawyer

            December 16, 2010 at 7:16 am

            Your grasp of mortgage accounting matters is woefully inadequate, Mr. Nemo.

            Assume that someone needs to take out a one-month loan at 4% with a principal amount of $300,000. At the start of the month borrower gets a check for $300,000. At the end of the month he has to pay back the $200K plus interest at 4%. $300K times .04 divided by 12 gives a figure of $1,000 for interest.

            With me so far? To clear the loan the borrower has to pay $301,000 at the end of the month. He rented the money for one month.

            Now, get yourself a mortgage calculator and look at the monthly payment for a $300K loan for 30 years. How much is the PI payment? $1,432.25. Now. Guess how much of that $1,432.25 payment went towards the interest accrued. Go ahead. Take a SWAG.

            I’ll answer for you. The interest for that first month was $1,000. You can generate an amortization schedule and see it for yourself.

            So, what does this mean? It means what you posted above is pure crap.

            Let’s go back to our borrower who got the loan for a month. Suppose he offers the lender a check for $1,432.25 and offers to take the loan for another month and pay them the accrued interest. The lender says yes. And then at the end of the second month the same deal is done again. And then they do it for 30 years that way. MY GOD! You have a 30 year mortgage.

            Here is the reality. At 4% over the life of a 30 year loan for
            $300K the borrower will pay back $515,608.52. Total. Not more than triple (350%) as you have alleged above. YOU CAN LOOK THIS UP FOR YOURSELF! Here’s a mortgage calculator you can use.

            http://www.mortgagecalculator.org/

            Now, as to the rule of 72s. You have misused it dreadfully. The rule of 72s has to do with how long it takes to double your money when invested at compound interest. Mortgage loans are not now and never have been compound interest. They are simple interest loans. You do not have to trust me on this. Look it up for yourself.

            Back to the rule of 72. That rule says that if you invest $1000 at 4 percent compounded annually you will double your money in approximately 18 years. YES! That’s right. Here’s how it works. Deposit $1000. At the end of the year the bank puts $40 into your account. At the end of the next year you have accrued interest on $1,040. That’s $41.60. So you have $1081.60 in your account. At the end of the next year you get interest of $43.26. Thus your balance is $1124.86. At the end of the next year your interest is $44.99. And so forth. Pull out your calculator. Plug in $1,000. Multiply that by 1.04. Then hit equals again and again. when you have reached 18 years the answer is approximately $2,025. Your principal has just about doubled. That’s the rule of 72s. But it has absolutely NO correlation to mortgage loans since you are not depositing money into a savings account.

            Banks do not invest in mortgages at compound interest. At the end of the first month in the example above the bank has interest income of $432.25. They cannot compound it on the borrower because the borrower has given it to them. It has not been added to the $300K mortgage balance.

            The strangest statement you maDE was that the banks never lose. How the hell can you say that? Look at the current financial crisis, which was generated by, among other things, massive failures in the housing market. The banks lost so f***ing much money on mortgages that the government felt it had to bail them out.

            For God’s sake, man. The banks have lost many billions if not trillions because of mortgage defaults. Stop listening to Rush Limbaugh and start thinking for yourself!

            • Carl Nemo

              December 16, 2010 at 9:46 am

              “So, what does this mean? It means what you posted above is pure crap.” …extract from post

              “Stop listening to Rush Limbaugh and start thinking for yourself”…extract from post

              “The banks lost so f***ing much money on mortgages that the government felt it had to bail them out.” …extract from post

              Thanks GHL for the rebuttal and difference of opinion concerning how loans are amortized etc. I didn’t crank figures into a mortgage calculator, but was simply throwing out how compound much less simple interest affects borrowers and how the entire housing debacle is linked to so much hype as far as home prices being artifically puffed to keep the “bubble effect” going. The bulk of the allegedly ‘lost money’ ended up killing greedy investors who bought woefully underinsured CDO’s; ie., bundled mortgages. The underlying assets still exist; ie., the houses, many now vacant that are being sold at fairer prices via auctions with price and value shaking hands in the marketplace rather than some hype from industry friendly appraisers working with the banks and real estate sector.

              Your rebuttal to my post is fine, but as I’ve said in the past it’s your terse, almost vicious, overly emotional slant is what has me concerned. Btw, I’ve never listened to a Rush Limbaugh program. I should have spent time to crank out exact figures like yourself rather than using the rule of 72′s. I winged it and seemingly blew the post in the details. My apologies for not using due diligence in this case. I haven’t paid on a mortgage in 25 years, owning everything I have outright with no debt, so possibly I’ve lost touch with the realities of our times, indicating onset dementia…no?

              “The banks lost so f***ing much money on mortgages that the government felt it had to bail them out.” …extract from post

              A great portion of the debt money was sold to offshore center banks who had ‘invested’ in CDO’s; ie., bundled debt obligations. AIG a major mega insurer who ‘insured’ these transactions but failed to maintain adquate reserves in the event of this ‘junk debt’ going bellyup. If I recall correctly, 60 billion dollars went to eight banks and none of those were U.S. based and yes U.S. banks did get the aid too. Why should U.S. taxpayers be bailing out the private banking and insurance sectors anyway? Seemingly the money guys like privatizing the gains while socializing the losses.

              In summation your posts and rebuttals are fine, I just wish you’d deep six your nasty ‘tone” by attacking the messenger. It’s totally unnecessary. I read your replies to other posters and its always the same or you’ll come on the horn with potshot posts too; ie., terse one liners, the M.O. of a troll. I’ll assume you aren’t such. : )

              Carl Nemo **==

  2. Curtis Dipilato

    December 20, 2010 at 2:30 pm

    I wonder if we will be seeing a increase in the real estate market any time soon. I was reading a artcile on this site about Moncton Real Estate i recommend it.