Making his case before Congress
NEW YORK (CNNMoney) -- During his speech before Congress Thursday night, President Obama briefly referenced an initiative to help rescue the troubled housing market.
"To help responsible homeowners we're going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% - a step that can put more than $2,000 a year in a family's pocket, and give a lift to an economy still burdened by the drop in housing prices," he said.
While details were scant, the new program sounds very similar to the existing Home Affordable Refinance Program (HARP) and isn't the broad new program aimed at facilitating millions of refinancings that some were expecting, said Jaret Seiberg, an analyst for MF Global Inc.'s Washington Research Group, which analyzes public policy for institutional investors.
However, Seiberg noted that even if Obama wanted to trot out a bigger plan to rescue the housing market, getting the legislation passed by Congress would be extremely difficult.
"Regulators can tweak the HARP to make it more effective without the need for legislation or financing," said Seiberg. "But a new initiative would require Congressional action, which we believe would be impossible to get."
Whether the administration could make an initiative like this work is another question entirely. The Obama administration has unveiled several programs designed to help struggling homeowners and ease the foreclosure crisis -- and many of them have fallen well short of their goals.
Here are some of the government's previous efforts, and how they've fared:
Home Affordable Modification Program (HAMP)
Trial launch: March 2009
Borrowers affected: As of July 2011, there have been 1.89 million trial modification offers extended to borrowers since the program launched in March, 2009.
HAMP was a big early disappointment -- not only because it fell well short of initial promises to lower mortgage payments for 3 to 4 million borrowers but because so many of the borrowers who were issued modifications early on quickly re-defaulted on their loans.
Track record: The program's record has improved and re-default rates have dropped, but they're still troubling. As of March, more than 19% of all borrowers with HAMP modifications are at least two payments behind twelve months after their loans have been modified.
Only 675,000 borrowers have received permanent modifications and are still in those refinanced mortgages. That's compared to 764,000 trial modifications that have been cancelled, usually as a result of missed payments.
Still, there have been improvements, with borrowers earning permanent modifications more quickly and in higher percentages than before. The modifications have lowered borrowers' payments by an aggregate of $7.8 billion, according to the Treasury Department.
Housing and Urban Development Secretary Shaun Donovan said that HAMP and other government foreclosure prevention programs have helped to create an infrastructure in which non-government mortgage modifications are processed.
In fact, the number of non-HAMP modifications during the first six months of 2011 came to 375,000, according to Hope Now, about twice as many as completed under HAMP over that period.
Second Lien Modification Program (2MP)
Launch date: April 2009
Participation: 37,466 borrowers
The Second Lien Modification Program (or 2MP) provides assistance to homeowners who have a second mortgage or a home equity line of credit in addition to their primary mortgage.
Many potential mortgage modifications have run into roadblocks because lenders of home equity loans and lines of credit refuse to cooperate. After all, the first mortgage holder typically gets paid first when an underwater mortgage gets modified and there's often nothing left for the second lien holder.
Yet, second lien holders have to agree to a mortgage modification -- and to take a loss -- before a loan can be refinanced. Under 2MP, the government pays cash incentives to the lenders of the second loans so they will allow the refinancing to proceed.
Track record: So far, only 3,516 borrowers have had their second mortgages fully extinguished by their second loan lenders, with an additional 33,528 receiving a partial reduction in their principal or other steps to reduce payments. That's a far cry from the estimated one million or more that the program was created to help.
The average amount involved is more than $67,000 for a full elimination of a loan balance and nearly $6,400 for a partial elimination.
Hardest Hit States Fund
Launch date: February, 2010
The Obama administration set aside $7.6 billion in funding for states that were hit hardest by the economic downturn to be used toward foreclosure prevention.
Eighteen states and the District of Columbia currently participate in the program and each state can spend the money on programs they determine best meet the needs of their residents.
Since the funding was allocated, all of the states have now implemented their programs, according to a spokeswoman for the Treasury Department.
They have directed about 70% of their funds toward programs that help homeowners who've lost their jobs, she said. Another 20% is being used to reduce mortgage principal for borrowers deep underwater. Much of the rest will go toward outreach and foreclosure counseling and prevention programs.
Track record: Too soon to tell. The Treasury does not aggregate data and the states have not produced full reports yet. There's been a big uptick in the number of servicers volunteering to participate in the program.
Home Affordable Foreclosure Alternatives (HAFA)
Launch date: April, 2010
All HAFA agreements started: 25,716
Aimed at borrowers who are underwater on their mortgages and who've been denied a modification via HAMP, HAFA was supposed to be a last-ditch effort to help homeowners avoid foreclosure. They still, however, lose their homes.
The program pays cash to both the borrower and lender to encourage a short sale, a deal in which the bank accepts the proceeds of the home sale as full repayment of the mortgage debt, forgiving any loss.
The program includes deeds-in-lieu, which are agreements in which the bank takes back the home directly from the borrower as full repayment.
Track record: HAFA was also a disappointment, with few borrowers taking advantage of the program. Others who would have participated, were ineligible because they did not meet a 31% debt-to-income requirement for approval. Earlier this year, that requirement was lifted.
Principal Reduction Alternative (PRA)
Launch date: June 2010
Trial modifications started: 29,406
This program is for borrowers with loans that are not backed by Fannie Mae or Freddie Mac or insured by the FHA. It requires servicers to evaluate the benefit of reducing mortgage principal for loans in which the balance has exceeded the value of the home by 15% or more.
Loan servicers are not required to reduce the principal, just to consider doing so. The mortgages may be ones in the HAMP program.
Track record: With less than 30,000 participants, this program has yet to gain much traction. But for those who are eligible for the program, PRA can result in substantial savings. The average reduction in principal is nearly $70,000.
Home Affordable Unemployment Program (HAUP)
Launch: July 2010
Participation: Only about 13,521 borrowers were participating in the program as of the end of June.
This program originally reduced or suspended mortgage payments for unemployed borrowers for up to three months, but on Wednesday, the Treasury Department announced it would extend that for up to 12 months.
Track record: Participation has been limited. The GSEs, Fannie Mae, Freddie Mac and the FHA, have their own forbearance programs and they represent a huge share of the market.
FHA Short Refinance
Launch date: September, 2010
This is one of the few programs designed to help borrowers who have remained current on their mortgage payments. If their servicers agree to write off at least 10% of the principal, underwater borrowers can refinance into a new FHA-insured loan.
The refinance will put them back in the black, at least on their first mortgage: The debt-to-value ratio has to exceed 97.75%. With any second mortgage factored in, it can't exceed 115%.
Track record: This got off to a very slow start, with only about 15 refinances done by early 2011. The program seemed to gain some traction this spring -- 23 servicers had signed up to participate -- when the House Financial Service Committee voted to kill it in March. It's future is in doubt.
As of late August, there were 870 cases in the pipeline, according to HUD.
Emergency Homeowner's Loan Program (EHLP)
Launch date: June, 2011
Loans affected: No data yet
This $1 billion program offers interest-free loans to homeowners who have been hit with a job or income loss and reside in one of the 32 states not covered by the Hardest Hit States program.
Loans are restricted to those who have a household income of $75,000 or less, or earn less than 120% of the median household income for a community. They must have missed at least three payments, be on the verge of losing their home and demonstrate the ability to resume payments once their period of unemployment ends.
Track record: Originally, the deadline was July 27 but the deadline was later extended again through September 30.
The program's target was to help 30,000 borrowers but it is going to fall far short of that goal. Due to a slow implementation and strict qualifications standards, only 10,000 to 15,000 borrowers will end up with a loan, according to HUD. The EHLP program will spend no more than $500,000, half the amount allocated.
Extended forbearance for FHA loans
Launch date: July, 2011
Loans affected: No data yet
This program extended to 12 months the period of time unemployed homeowners with Federal Housing Administration-backed mortgages could skip or make smaller mortgage payments, up from a minimum of four.
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