Obama’s home-loan help questioned
Panel says foreclosures have moved beyond homes purchased with high-risk mortgages
WASHINGTON – The Obama administration’s effort to help homeowners avoid foreclosure may not achieve its goal of helping 3 million to 4 million borrowers and may simply delay mortgage defaults for many, a government watchdog group says.
The Congressional Oversight Panel, charged with making regular assessments of the $700 billion financial rescue fund enacted last year, said the Treasury Department should consider whether to improve the current $50 billion program or adopt new programs to meet an expected rise in foreclosures fed by increased unemployment.
The panel’s report is scheduled to be made public today.
It comes a day after the Treasury said its mortgage relief effort has helped 500,000 homeowners and that it was still on track to help up to 4 million homeowners within three years.
“We’ve put significant pressure on servicers to ramp up their efforts,” said Housing Secretary Shaun Donovan. “We’re holding them to higher performance standards.”
But the oversight panel, chaired by Harvard law professor Elizabeth Warren, concluded that the foreclosure crisis has now moved beyond the subprime mortgage market that ensnared many homeowners, particularly low-income families. The program, the report states, was not designed to deal with foreclosures caused by unemployment.
Foreclosures, the report said, are now stalking families who took out conventional, fixed-rate mortgages and put down payments of 10 to 20 percent on homes that would have been within their means in a normal market.
Treasury’s program, known as the Home Affordable Modification Program, “is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” the report says.
The oversight panel accepted the report by a vote of 3-2, with the committee’s two Republican members voting against it.
Rep. Jeb Hensarling, R-Texas, one of the two dissenters, described the foreclosure mitigation program as a failure and rejected suggestions in the report that the program should be expanded.
The majority’s report, however, said that rather than abandon the program, Treasury should improve it. Rising foreclosures, the report asserted, could have devastating effects not only on families, but also on local communities and the economy in general.
The report’s underlying theme was that foreclosures were bound to take a turn for the worse and that Treasury did not appear prepared to confront a rise in defaults.
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