banktime.com

Much ink has been spilled about the Obama administration’s attempts to help struggling homeowners bail their way out of disaster. To say that opinions have been divided on the President’s real estate bailout since Day One would be an understatement: for every relentlessly positive jingoist who steadfastly praises the Commander in Chief and refuses to believe that he could possibly misstep, there seems to be one doubt-spewing naysayer ready to knock him down and call him a Socialist. Now that one year has passed since his election, it’s time to ask ourselves honestly how exactly President Obama is doing in terms of his campaign promises to help drowning homeowners and reinvigorate the mortgage industry. Not in terms of our own opinions and beliefs, but in terms of hard facts and provable evidence.

At the beginning of this year, President Obama convinced Congress to earmark seventy-five billion dollars in taxpayer funds to wards helping banks modify troubled home loans in the hopes of turning them around and keeping more individuals and families away from the foreclosure courts. It was a hotly-contested maneuver, and one that was unpopular with conservatives since many Republicans believed that money could be much better spent in other areas. And yet, it seems like that vast amount of money may not have actually been enough to tempt banks to work with struggling families. According to the reports of experts, the majority of those homeowners who sought modifications under the Obama plan have actually seen their payments increase over time – and the majority are ultimately still ending up with delinquent payments.

Earlier this week, the Treasury Department issued an announcement stating that almost six hundred fifty-one thousand homeowners around the nation had been on the receiving end of mortgage modifications as set up by the Obama administration. That number accounts for approximately twenty percent of all national homeowners who are currently at least sixty days behind on their regular mortgage payment, says the Treasury. By those results, the government is currently able to claim the most statistically successful mortgage rescue program to date during the current economic crisis.

The program, informally called HAMP (as an acronym for the Home Affordability Modification Program), allotted funds as incentives for lenders – as opposed to direct bailouts for struggling homeowners – to restructure endangered mortgages. Banks have had the opportunity to garner as much as four thousand dollars for every loan that they modify rather than foreclose upon. The program has actually proven doubly beneficial for banks when it comes to loans that are successfully turned around, since it is quite a bit less expensive to modify a mortgage than to go through the process of a foreclosure. In this real estate market, many homes are actually worth a good deal less than the value at which they are mortgaged, so banks have been taking massive hits when these loans go sour.

One major concern that the government has at the moment is the observation that few homeowners are receiving long-term modifications. In fact, many banks are taking the government’s money and then extending only a few months of laxer terms to consumers, ultimately leaving these individuals and families just where they started off. It remains to be seen what modifications, if any, might be made to HAMP to make the program more effective.