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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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03/19/2011

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The first step in crafting a successful mortgage modification program is to have an
accurate empirical picture of the mortgage market. As the Panel has noted with other TARP
programs, insufficient data collection undermines the development of good policies. The lack of
comprehensive, reliable data also makes it difficult for policymakers to identify successful loan
modifications or make apples-to-apples comparisons among programs. This information is
crucial for understanding the changing nature of the mortgage market and crafting informed,
targeted policy responses.

It is important to ensure that modified mortgages be affordable to borrowers. Because
the HAMP requirement that homeowners spend 31 percent of their monthly income on their
first-lien mortgage payments does not take into account local conditions, overdue payments,
second liens, and other borrower debt, the Panel has questions about the sustainability of many
HAMP modifications. Future mortgage modification programs should consider the best way to
measure overall affordability.

353

Data provided by Zillow.com (Feb. 18, 2011).

0%

5%

10%

15%

20%

25%

30%

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The problems that Treasury has encountered with HAMP underscore the importance of a
timely, decisive response to any future foreclosure crisis. When HAMP was introduced in early
2009, the foreclosure crisis was already well under way, and HAMP was not well designed to
address the coming waves of foreclosures, which were increasingly driven by unemployment and
negative equity. Over the next two years, Treasury provided increasingly generous incentives to
participating borrowers, lenders, and servicers, which gave them reason to hold out for a better
offer. While the constant flux of new programs, new standards, and new requirements reflected

Treasury‘s efforts to respond to recommendations made by oversight bodies, the shifting ground

also led to confusion among servicers and borrowers. Any future foreclosure mitigation
programs should be forward-looking and attempt to address new and emerging problems before
they reach crisis proportions.

Future policymakers should be mindful that the incentives of mortgage servicers are
different from those of the government, and design any foreclosure mitigation program with that
reality in mind. Borrower eligibility must depend on criteria set forth in the foreclosure
mitigation program, rather than on the willingness of servicers or lenders to participate. If
incentive payments are used to drive servicer participation, those payments must be sufficient to
offset the financial incentives for servicers to push for foreclosure. Modification programs
should also include an appropriate monitoring mechanism to ensure that servicers are accurately
reporting the reasons for denials and cancellations, and there should be meaningful sanctions for
noncompliance.

The need for better communication with homeowners is another important lesson to be
drawn from HAMP. Because servicers generally first contact borrowers in a debt-collection
role, any future foreclosure mitigation program that relies on servicers would benefit from a
government-run outreach campaign designed to inform borrowers of their options for preventing
foreclosure. A uniform and streamlined modification process would allow housing counselors to
be more effective and allow borrowers and servicers to navigate the system more easily.
Foreclosure mitigation efforts that rely on servicers should also make increasing servicer
capacity an early priority.

It is also important that policymakers focus on ensuring good outcomes for homeowners,
rather than becoming bogged down in process-related concerns. HAMP has a dizzying number
of rules. In its oversight of Fannie Mae, HAMP‘s administrator, and Freddie Mac, HAMP‘s
compliance agent, Treasury has seemed to focus more on ensuring that its rules are followed than
on addressing the individual concerns of the people that the program is supposed to help.

Finally, the current crisis shows how closely foreclosure prevention is intertwined with
efforts to ensure bank solvency. Delinquent mortgages continue to weigh on the U.S. banking
system, and government efforts to remedy either the debt facing homeowners or the weakness of
the banking system can have significant effects on the other problem. Principal write-downs on
a large scale, for example, would help homeowners but hurt the banks. Over the last two years,

117

Treasury has designed housing programs that aim to avoid fully facing this trade-off, by
providing assistance to homeowners without restructuring bank balance sheets.354

The

limitations of that approach are apparent in the problems that Treasury has encountered.

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