Saturday, April 2, 2011

Foreclosure-Prevention Plans Show Limited Impact

WASHINGTON—Two pieces of the Obama administration's foreclosure-prevention plan have assisted fewer than 30,000 borrowers, according to data released for the first time Friday, adding to mounting evidence that the program has done little to turn around the foreclosure crisis.
The Treasury Department said Friday that only 17,000 homeowners have received modifications for second mortgages such as home-equity loans.
That compares with 557,000 borrowers that have received permanent modifications of first mortgages through February. Treasury didn't say how many of those borrowers have second mortgages.
At the same time, about 10,000 borrowers entered into agreements with servicers in a related program that provides banks with incentives to allow consumers to sell their homes for less than the total mortgage amount to avoid foreclosure.
Only about 4,500 homeowners have completed that program, Treasury said.
The administration's efforts to combat foreclosures have come under increasing fire on Capitol Hill, with House lawmakers voting earlier this week to end the government's flagship Home Affordable Modification Program.
But Treasury officials said the data on both pieces of the administration's overall plan, known as the Making Home Affordable Program, "underscore the importance of continuing our efforts to help families stay in their homes."
"Each month, the administration's Home Affordable Modification Program helps over 25,000 additional families avoid foreclosure, and it has set important standards that have led to more than two million mortgage modifications outside of the program," said Timothy Massad, Treasury's Acting Assistant Secretary for Financial Stability.
He also said Treasury is working to implement additional programs to assist families in the hardest-hit states.
Most first-lien home loans are held by the government-controlled mortgage companies Fannie Mae and Freddie Mac or by other investors in mortgage securities.
By contrast, banks hold most of the seconds and other junior-lien mortgages. About $1 trillion of junior-lien home mortgages were outstanding last year, according to Federal Reserve data. The majority of those were held by commercial banks and the rest were owned by savings banks and credit unions.

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