Even if the Obama administration’s foreclosure help program becomes an overwhelming success, foreclosures will still rise, according to Herbert Allison, assistant secretary for financial stability at the Treasury Department and head of the Troubled Asset Relief Program.
Allison explained that before the current housing crisis began, foreclosures were already in the hundreds of thousands across the country, so Americans should expect foreclosures as a fact of life.
In a meeting with the Senate Banking Committee, Allison described how the administration is making progress with its foreclosure help program which consists of the Home Affordable Modification Program, the Home Affordable Refinance Program and the initiative to support Fannie Mae and Freddie Mac.
He said that 27 mortgage services have already signed up to carry out the foreclosure help program, including the 5 largest servicers in the country. Considering loans held by these 27 servicers and by Fannie Mae and Freddie Mac, over 85 percent of home loans in the U.S. are covered under the program.
He also reported that 325,000 modifications have already been offered to borrowers under the three-month trial initiative.
The administration has also responded to calls for expanding the foreclosure help program, Allison stated. He said the HARP previously accepted only applications from borrowers whose home loans were 105 percent of home values. Now, borrowers whose home loans are 125 percent of their home values can apply for loan refinancing.
The HAMP scheme was also expanded, Allison said. In April, the administration launched a scheme to help homeowners with second lien loans, and in May, it launched alternatives to foreclosure, providing incentives to lenders that help facilitate short sales and other contracts between lenders and borrowers that prevent foreclosure. In May, the administration also launched a scheme to encourage lenders to modify loans covering homes which have experienced significant price declines.
Under the HAMP scheme, Allison said, more borrowers can apply because there is no loan-to-value limitation. More than 97 percent of all homeowners with home loans are covered because the conforming loan limit for single-family homes has been increased to $729,750.
In addition, Allison said the administration will step up the evaluation and monitoring of the program. Starting August 4, the Treasury Department will publish the loan modification performance of the 27 mortgage servicers monthly.
Nevertheless, Allison said, the federal foreclosure help program will not help everyone. Homeowners who bought homes priced far above what they really can afford will not be helped.
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