Mortgage Assistance Programs Unceremoniously Scrapped
Eyebrows rose when Edward DeMarco, the director of the Federal Housing Finance Agency, missed a self-imposed deadline to present new analysis of mortgage debt relief efforts extended through Fannie Mae and Freddie Mac.
Since the mortgage crisis of 2008, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have been under the watchful eye of DeMarco and the FHFA.
Though originally reluctant to swallow bloated mortgage debt, DeMarco eventually relented under pressure from Congress. Several government-sponsored debt relief programs have been launched, all designed to in one way or another reduce mortgage debt for underwater homeowners facing foreclosure on loans backed by Fannie and Freddie.
Without any announcement or explanation it seems that DeMarco has changed his mind, ending pilot programs with CitiBank and Wells Fargo that would have explored the implications of a mortgage lender simply swallowing mortgage debt; once again leaving homeowners with government-backed mortgages with few relief options.
The Home Affordable Modification Program, available for home loans originated by a government-affiliated agency before 2009, has been largely ineffective, falling well short of its goal of reaching a million loan modifications. The Treasury has opened programs to shell out refunds to mortgage owners as part of the $27 billion settlement with Bank of America, Wells Fargo, JP Morgan, etc. But, well over half of all American mortgages are backed by Freddie, Fannie or the FHA and are not eligible for a refund from the settlement pool.
In the meantime foreclosures are still mounting, and expected to climb through 2013. As we now know, the mortgage crisis was created by a combination of overestimated property values and irresponsible loans offered by mortgage lenders. When home values crashed, this left millions of homeowners with a massive gap between what they owe on their homes, and what their homes are actually worth. At the moment, there are few options for the homeowners who have managed to keep their homes other than simply biting the bullet. Is this fair? Obviously not, but what are the overall economic implications of fixing the problem?
By: Javi Calderon
