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TARP Congressional Oversight Panel - Full Decommissioning Report for April 2011 Expiration

TARP Congressional Oversight Panel - Full Decommissioning Report for April 2011 Expiration

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Published by gonzodave
This Decommissioning Report states loudly that the anticipated costs of the 2008 TARP were NOT incurred because of the failure to provide aide to Main Street foreclosures.

This unspent money was compounded by the removal of another bill recently by H.R. 830: FHA Refinance Program Termination Act which received only 245 applications from homeowners instead of the anticipated 1.5 million.

Vast billions intended for American homeowners were not spent.

I ask why the cut in social programs now underway in Congress?

~gonzodave
This Decommissioning Report states loudly that the anticipated costs of the 2008 TARP were NOT incurred because of the failure to provide aide to Main Street foreclosures.

This unspent money was compounded by the removal of another bill recently by H.R. 830: FHA Refinance Program Termination Act which received only 245 applications from homeowners instead of the anticipated 1.5 million.

Vast billions intended for American homeowners were not spent.

I ask why the cut in social programs now underway in Congress?

~gonzodave

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Published by: gonzodave on Mar 19, 2011
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Treasury introduced the foreclosure mitigation programs in an effort to prevent
foreclosures and stabilize the housing markets. Yet, foreclosures have remained at very high
levels over the last two years. In December 2010, there were 232,000 foreclosure starts, while
there were 56,000 foreclosure sales. This compares to 282,000 foreclosure starts and 51,000
foreclosure sales in March 2009, when HAMP was introduced. (Foreclosure sales dipped in late
2010 as a result of a number of large mortgage servicers suspending foreclosures in order to
review their internal foreclosure procedures, but these numbers will likely increase in the coming
months as these servicers resume their foreclosures.) Figure 21 shows foreclosure starts and
completions by month since March 2009. The 685,574 households currently receiving TARP
housing assistance – shown in Figure 19– represent roughly the same number of households that
move into foreclosure proceedings every three months, based on the current rate.

341

Congressional Budget Office, Report on the Troubled Asset Relief Program – November 2010, at 4
(Nov. 29, 2010) (online at www.cbo.gov/ftpdocs/119xx/doc11980/11-29-TARP.pdf) (―CBO Report on TARP –
November 2010‖).

342

The HAMP expenditures are as of February 25, 2011, while the expenditures for the other two programs
are as of February 28, 2011. Treasury data provided to the Panel (Feb. 28, 2011).

110

Figure 21: Foreclosure Starts and Completions343

As foreclosure starts and completions have remained at a persistently high level, home
prices have continued to fall. The S&P/Case Shiller index, which measures residential real estate
prices nationwide, began declining in 2007, and the index‘s fall continued through the financial
crisis of 2008 and beyond. After stabilizing in early 2010, home prices continued their decline in
the second half of last year. Since the TARP was enacted in October 2008, nationwide home
prices have declined by 9.1 percent. Since their peak in February 2007, nationwide home prices

343

HOPE NOW Alliance, Appendix – Mortgage Loss Mitigation Statistics: Industry Extrapolations
(Quarterly from Q1-2007 to Q1-2009)
, at 4 (online at www.hopenow.com/industry-
data/HOPE%20NOW%20National%20Data%20July07%20to%20April09.pdf) (accessed Mar. 11, 2011); HOPE
NOW Alliance, Appendix – Mortgage Loss Mitigation Statistics: Industry Extrapolations (Monthly for Dec 2008 to
Nov 2009)
, at 2 (online at www.hopenow.com/industry-
data/HOPE%20NOW%20National%20Data%20July07%20to%20Nov09%20v2%20(2).pdf) (accessed Mar. 11,
2011); HOPE NOW Alliance, Industry Extrapolations and Metrics (May 2010), at 8 (June 28, 2010) (online at
www.hopenow.com/industry-data/HOPE%20NOW%20Data%20Report%20(May)%2006-21-2010.pdf); HOPE
NOW Alliance, Industry Extrapolations and Metrics (September 2010), at 8 (Oct. 31, 2010) (online at
hopenow.com/industry-data/HOPE%20NOW%20Data%20Report%20(September)%2010-31-2010%20v2.pdf);
HOPE NOW Alliance, Industry Extrapolations and Metrics (December 2010), at 8 (Feb. 2, 2011) (online at
www.hopenow.com/industry-data/HOPE%20NOW%20Data%20Report%20(December)%2002-01-
2011%20v2.pdf).

0

50

100

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200

250

300

Thousands of Loans

Foreclosure Starts

Foreclosure Sales Completed

111

have fallen by 30.2 percent.344

Figure 22 shows that this decline in home prices has happened

simultaneous with the rise in foreclosures.345

Figure 22: Foreclosure Actions and Home Prices346

Putting additional pressure on housing prices is a glut of unsold homes. According to one
estimate, there are currently more than six million unsold housing units in the United States, as
compared to a pre-crisis level of 3.8 million.347

Figure 23 shows the overhang of housing

344

S&P/Case Shiller Index data, which runs through December 2010, accessed through Bloomberg
Financial Data Service (accessed Mar. 4, 2011).

345

At the Panel‘s March 4, 2011, hearing, Assistant Secretary Massad noted that foreclosures put
downward pressure on the prices of neighboring homes. ―A foreclosure for any family that goes through it is
obviously a terrible economic loss,‖ he stated. ―It‘s also a great social and – or great psychological and emotional
loss. It‘s a loss to the community. The community suffers from it because neighboring house prices fall.
Particularly where you have a vacant home that can then be subject to vandalism. … So you know this situation is a
drag on our economy as a whole.‖ Massad Testimony to the Panel, supra note 122. Patrick Lawler, the FHFA‘s
chief economist, made a related point, noting that foreclosures can result in additional losses for government
sponsored enterprises Fannie Mae and Freddie Mac. Speaking about HAMP and other foreclosure-prevention

programs, he stated: ―These programs have benefited the enterprises by mitigating risks and reducing both direct

losses on loans where foreclosure is avoided and indirect losses on properties where housing markets are stabilized,

which reduces defaults on other loans.‖ Congressional Oversight Panel, Testimony of Patrick Lawler, chief

economist and head of the Office of Policy Analysis and Research, Federal Housing Finance Agency, Transcript:
COP Hearing on the TARP‟s Impact on Financial Stability (Mar. 4, 2011) (publication forthcoming) (online at
cop.senate.gov/hearings/library/hearing-030411-final.cfm).

346

The metric ―foreclosure actions,‖ as used by RealtyTrac, encompasses default notices, scheduled
auctions and bank repossessions. RealtyTrac: Foreclosures in February, supra note 285. S&P/Case Shiller Index
data accessed through Bloomberg Financial Data Service (accessed Mar. 4, 2011).

347

Data provided by CoreLogic (Feb.16, 2011).

0

50

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200

250

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Index Value (100 base)

Foreclosure Actions

Foreclosure Actions

S&P Case-Shiller

112

inventory in the market. The chart distinguishes between visible inventory and pending
inventory, which is a measure of potential additions to the sales inventory from homes that are in
the foreclosure process or have mortgages that are seriously delinquent. There are currently 16
months of visible housing supply, as compared to an average of 7.3 months of visible inventory
in 2006.348

Figure 23: Visible and Pending Housing Inventory349

Because borrowers entering foreclosure have been delinquent on their mortgage
payments for several months, delinquencies are an indicator of likely future trends in
foreclosures. HAMP‘s declining trial modification production is therefore troubling in relation
to the current high level of delinquencies. While mortgage delinquencies have declined over the
past three quarters, they remain near historically high levels. At the end of 2010, loans that were
30, 60, or 90 or more days delinquent represented approximately 8.2 percent of all outstanding
loans – down from 10.1 percent during the first quarter of 2010, which was the peak during the
current crisis, but still above 7.8 percent rate in the fourth quarter of 2008. Mortgages in the
foreclosure inventory, meaning those currently in the foreclosure process, represent 4.6 percent
of outstanding loans – which equals the highest level since 2006 and is well above the 3.3
percent rate in the fourth quarter of 2008. The delinquency rate remains 18 percent above its

348

Even though the pending nationwide inventory increased only from 3.4 million in January 2006 to 3.9
million in November 2010, the rate at which the inventory was clearing slowed down, which explains why the rate
at which the pending inventory is expected to clear has more than doubled during the same nearly five-year period.
Data provided by CoreLogic (Feb. 15, 2011).

349

Data provided by CoreLogic (Feb.16, 2011).

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

No. of Units

Visible Inventory Pending Inventory

113

level at the time the TARP was enacted, and the foreclosure inventory rate is 56 percent above its
level from that period.350

Figure 24 shows delinquency and foreclosure inventory rates since

before the foreclosure crisis began.

Figure 24: Delinquency and Foreclosure Inventory Rates351

Unemployment rates remain problematic as well, given the link between joblessness and
mortgage delinquency. Figure 25 shows that the nationwide delinquency rate and the U.S.
unemployment rate have followed similar trends since early 2006.

350

National Delinquency Survey – 2010 4th Quarter, supra note 4.

351

National Delinquency Survey – 2010 4th Quarter, supra note 4.

0%

2%

4%

6%

8%

10%

12%

14%

16%

Delinquency Rate

Foreclosure Inventory at End of Quarter

114

Figure 25: Unemployment and Delinquency Rates352

Negative equity, a situation in which homeowners owe more than their homes are worth,
is another factor that may contribute to foreclosures. Figure 26 shows that the percentage of
homeowners who are underwater has risen by more than 10 percentage points since the second
quarter of 2008.

352

Data accessed through Bloomberg Financial Data Service (accessed Mar. 4, 2011).

0%

2%

4%

6%

8%

10%

12%

Unemployment Rate

Delinquency Rate

115

Figure 26: Percentage of Homeowners who are Underwater353

While we cannot know what the state of the housing market would be in the absence of
HAMP, we do know that despite the implementation of HAMP and other foreclosure mitigation
efforts, foreclosures remain high, and the housing market shows continuing signs of stress.

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