The reality is that the Obama loan modification program has saved roughly 100 times as many homes from foreclosure as the programs started under President Bush. That doesn’t mean the Obama plan is perfect or wonderful, but it’s surely better than many commentators suggest.

For it’s part the Bush Administration had two important foreclosure programs.

Hope For Homeowners

First, there was the Hope for Homeowners plan, a program which set aside $300 billion to refinance toxic loans made no later than January 1, 2008.

No doubt $300 billion is a lot of money but just how many loans were refinanced under H4H? Let’s see, there were 0 in fiscal 2008, 23 in fiscal 2009 and 48 so far in fiscal 2010. That’s a total of 71 loans. Over three years. A little more than one per state.

Why did Hope for Homeowners fail? Lender participation was voluntary, new loans were limited to 90 percent of appraised value and appraised values had gone down so lenders were being asked to take a loss for every loan refinanced under the program.

FHASecure

Second, there was the FHASecure program.

“In the coming days,” said President Bush in 2007, “the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we’re going to start reaching out and making sure people know that this option is available to them so they can stay in their homes.”

Sounds great. So what happened?

To follow the program you have to look at the number of delinquent conventional loans refinanced with FHA-insured mortgages. There were no such loans in fiscal 2007, 3,794 such loans in fiscal 2008 and 316 mortgages in fiscal 2009. That’s a total of 4,110.

But according to then-HUD Secretary Alphonso Jackson the story was different.

“FHASecure,” he said, “has helped more than 100,000 families stay in their homes. Homeowners are cutting their monthly mortgage payments by an average of $400 a month compared to their exotic subprime loans. They no longer have anxiety about finding foreclosure notices in their mailboxes, thanks to the safe mortgage alternative that FHASecure offers.”

So did the program help 4,100 delinquent conventional borrowers or more than 100,000?

The original purpose of the FHASecure program was to help delinquent conventional borrowers get FHA financing. Jackson himself had testified before Congress in 2007 that the FHASecure program was for “borrowers who are otherwise creditworthy, but have recently become delinquent on their mortgages as their teaser rates reset.”

But since the program wasn’t working the solution was to redefine the program.

HUD did this by simply changing its FHASecure Frequently Asked Questions page to say “these FAQs have been modified to reflect that the term FHASecure applies to all conventional to FHA refinance transactions. The previous edition of FAQs indicated that only those borrowers who were delinquent due to reset of their non-FHA ARMs were eligible for FHASecure, causing confusion.”

And just like that the FHASecure program was a “success” — unless you were one of the millions of borrowers with a toxic loan that needed to be refinanced.

Making Home Affordable

In March 2009, a few weeks after entering office, the Obama Administration started the Making Home Affordable program. In basic terms, the program today has four elements:

1. The Home Affordable Refinancing is for those making payments who want to refinance but lack equity.
2. The Home Affordable Modification is for borrowers who face foreclosure as a result of higher mortgage payments, reduced income or hardship (think medical bills).
3. The Second Lien Modification Program (2MP) is for borrowers with second liens of more than $5,000. May result in lower interest rate or an extended loan term.
4. The Home Affordable Foreclosure Alternatives Program (HAFA) is for borrowers who have been unable to get help under Making Home Affordable. It provides as much as $3,000 to borrowers who participate in a short sale or deed-in-lieu of foreclosure.

So how is the program doing?

The July 2010 results look like this:

• The government has identified 1,623,584 delinquent borrowers who qualify for program help.

• Some 1,528,563 have been asked to participate in the program. Amazingly, 245,651 refused, meaning that 1,282,912 borrowers started loan modification trials.
• Of those who started loan modifications, 520,814 could not complete the three-month trial period and will likely lose their homes. In addition, 8,823 who passed the trial modification period and obtained a “permanent” loan modification actually re-defaulted. In total, 529,637 borrowers have washed out of the program to date.
• Roughly 364,077 borrowers are still in trials.
• There have been 389,198 permanent modifications to this point. These are people who otherwise would have lost their homes.

The bottom line: The Obama program has so far saved 389,000 borrowers from foreclosure, a number which will increase in the coming months and a number which is now nearly 100 times greater than the foreclosure prevention results under the Bush Administration.

Is it good that more than nearly 530,000 borrowers have so far dropped out of the program? Of course not, it’s a terrible thing to face foreclosure. But ask yourself: How come we suddenly have so many distressed buyers in the first place? When did the foreclosure mess begin? Why weren’t distressed borrowers helped before, when the foreclosure crisis first began to unfold? How much help and enthusiasm have lenders given the Administration? What better alternative has anyone been able to offer the 530,000 borrowers who did not succeed with Making Home Affordable?

Blaming the Obama program for failing to save more distressed homeowners is like a guy in a life raft who drills a hole in the bottom and then complains that everyone else isn’t bailing fast enough. It just isn’t right.

———————————

Published originally on the Huffington Post.

100 to 1 — Obama Mortgage Modification Plan Tops Bush is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Bush, FHASecure, foreclosure, H4H, Hope for Homeowners, Jackson, modification, mortgage, Obama, re-default

“President Obama’s mortgage modification program, known as the Home Affordable Modification Program or HAMP, was supposed to be the fulfillment of Obama’s promise to take care of Main Street more than Wall Street. Yet, just over a year into his presidency, Wall Street is on the rise and Main Street — or at least the homes that line it — remains on the decline. Not only has Obama’s $75 billion program failed to secure permanent mortgage modifation for more than 116,000 homeowners (while 3 million went into foreclosure) and not only does the Administration now say it won’t help more than 1.5 to 2 million homeowners overall, there’s actually more bad news: it seems to actively discourages lenders from loan forgiveness.” (See: Yet Another Failure for the Mortgage Modification Program, March 24, 2010)

Really? Is this news in context, national or otherwise?

Here’s some context.

Hope for Homeowners

The Bush Administration had two programs to help mortgage borrowers.

The Hope for Homeowners program resulted in 12 mortgages for distressed borrowers in fiscal 2010 and 23 loans in fiscal 2009. It says here that’s a total of 35 loans under the H4H effort.

FHASecure

Then, of course, there was the FHASecure program.

“The FHA will launch a new program called FHA-Secure, said President Bush in August 2007. “This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we’re going to start reaching out and making sure people know that this option is available to them so they can stay in their homes.”

And how many delinquent conventional borrowers got new FHA mortgages under the FHASecure program? There were 3,794 conversions in fiscal 2008 and 316 in fiscal 2009 — that’s a total of 4,110 borrowers who were helped.

Meanwhile, the Treasury Department says that as of the end of February 2010, “more than one million borrowers were receiving a median savings of $500 each month – a 36 percent median monthly payment decrease. Permanent modifications have been granted to 170,000 homeowners and an additional 91,800 permanent modifications have been approved by servicers and are pending only borrower acceptance.”

The truth is that no federal program will save all homeowners. But even the Washington Independent should be able to see the difference between fewer than 5,000 homeowners saved with the Bush programs over several years and more than 170,000 permanent loan modifications in less than a year.

Blaming the Obama administration for the inability to help more mortgage borrowers is like complaining about ambulances because they’re loud. It makes no sense.

The mortgage crisis did not start on January 22, 2009. It started when the federal government stopped regulating and allowed lenders to make toxic loans.

The Federal Reserve, under the Home Ownership Equity Protection Act (HOEPA), could literally have banned option ARMs, mortgage applications with no documentation and other “nontraditional” lending programs by defining them as “unfair and deceptive acts or practices.” Rather than use the authority it has had since 1994, the Fed did nothing to protect borrowers or mortgage investors.

And that’s a huge part of how we got here. Truth is, there would be no mortgage crisis today if the Federal Reserve had used its lawful authority. But then profits on Wall Street would have been smaller, bonuses would have been reduced and stock values would not have soared.

Photo Credit: FBI

Has The Obama Mortgage Modification Program Failed? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Bush, FHASecure, foreclosure, H4H, Hope for Homeowners, Obama

Critics of the program — and there are many and they are loud — will quickly overlook several issues:

First, not all borrowers are being helped. It’s true. But helping all distressed borrowers is not possible and has never been possible.

Second, the results are small compared to the problem. It’s true. But the problem of toxic loans did not start in 2009 when the Making Home Affordable program began, it started under the Bush Administration when lenders were allowed to ignore traditional underwriting guidelines and regulators did nothing to protect the public.

Third, no one will compare the Obama results to date with the results of the Bush Administration. But we will:

Hope For Homeowners under Bush resulted in 934 loan applications and 23 mortgage conversions.

The FHASecure Program was announced by President Bush in August 2007. At the time he said that “In the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we

Mortgage Modifications: Bush Versus Obama is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Bush, defaults, distressed, FHASecure, Foreclosures, HAMP, Hope for Homeowners, Making Home Affordable, Mortgages, Obama

These are enormous numbers compared to the Bush years. Under the FHASecure program about 4,000 delinquent conventional borrowers were able to refinance there has been just one loan completed under the Help For Homeowners plan (honest, really, just one).

MHA provides $75 billion for sustainable mortgage modifications through the Home Affordable Modification Program (HAMP) and it’s hard not to see that 230,000 trial modifications is a big deal. That said, there are other figures which are also important. For instance, how many of those 230,000 borrowers will successfully complete their trials? All they have to do is make three monthly payments on time, in full and their loans will be modified.

Seen another way, the new effort has already produced more than 50 times the activity of the Bush-era programs.

It would be great if most trials succeed, but then we come to the next issue: What about six months from now? How many of the loans which are modified will be current? The evidence to date from the Office of the Comptroller of the Currency is that most will again be delinquent.

And so, yes, kudos to the government for supporting Main Street, good luck to those who are trying to get permanent modifications, but lets see what the numbers show in a few months.

Mortgages: Feds OK 230,000 Modification Trials is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: FHASecure, Hope for Homeowners, Making Home Affordable, MHA, modification, mortgage, trial