Oversight Panel Criticizes Mortgage Modifications For Falling Short

By Kyle LaFleur

The Congressional Oversight Panel held a meeting Wednesday to discuss the Treasury Department’s role in foreclosure mitigation programs under the Trouble Asset Relief Plan (TARP). The Treasury Department, which was represented by the department’s Chief of Homeownership Preservation Office Phyllis Caldwell, was criticized for the modest number of foreclosures prevented by these programs.

“Recently as the goal of preventing three to four million foreclosures has appeared increasingly distant, the Treasury has redefined as saying the goal now is offer temporary mortgage modification to three to four million homeowners,” said departing Delaware Senator Ted Kaufman (D), the panel’s chairman.

Kaufman warned that of these three million modification offers granted as few as 100,000 foreclosures would be prevented, which he felt deviated the program’s measurement of success from the ultimate goal of keeping homeowners in their homes. 

“In many ways its like a major league baseball batter pledging to swing at every pitch,” Kaufman said. “What matters is not how often you swing, what matters is how often you get on base.”  

In defense of the Treasury, Caldwell highlighted the Home Affordable Modification Program (HAMP) which was unveiled in 2009 and aids homeowners in bankruptcy by allowing them to modify their mortgage before they fall under foreclosure. Caldwell said the program has given struggling homeowners relief, used tax money efficiently and transformed the operations of the entire mortgage system.

“In the first quarter of 2009, nearly half of mortgage modifications increased borrowers’ payments or left their payments unchanged,” said Caldwell. “By the second quarter of 2010, 90 percent of mortgage modifications lowered payments for the borrower. This means homeowners are receiving better solutions.” 

According to Caldwell, it was still the department’s goal to reach three to four million homeowners with the expansion and enhancement of programs to respond to the housing crisis.  

“Our programs targeting unemployment and negative equity are just underway, and we continue to focus our efforts on reaching as many homeowners as possible,” said Caldwell.

In the 18 months since HAMP was created, panel member Damon Silvers said there have only been 467,000 modifications compared to seven million homeowners struggling with the possibility of foreclosure. Silvers described this number as a good thing that unfortunately “does not appear by any means, by any measure to be good enough.”