Treasury Should Mandate Mortgage Modifications, Says TARP Watchdog

The man in charge of monitoring the Troubled Assets Relief Program (TARP) told members of the Senate Finance Committee Tuesday that the Obama administration should consider forcing lenders to reduce payments for homeowners behind on their mortgages.

Neil Barofsky, the Special Inspector General of TARP, a $700 billion financial rescue program designed to help cushion the blow of the recent housing collapse, said that foreclosures have increased since the current administration announced measures last year to straighten out the housing market.

According to Barofsky, the Treasury Department's Home Affordable Modification Program (HAMP), a voluntary $75 billion foreclosure-prevention policy which gives payments to lenders who agree to reduce the principal on homeowners' loans, “has made very little progress in stemming this onslaught."

In a report put out Tuesday morning, Barofsky wrote that the Treasury Department could do more for borrowers by making the program mandatory.

"Giving servicers the discretion to implement principal reduction introduces a questionable inconsistency into the HAMP program and stands in stark contrast to the mandatory nature of the other significant mortgage modification triggers."

Reid: Time To Travel Down Main Street

By Suzia van Swol-University of New Mexico-Talk Radio News Service
It is time to focus less on Wall Street and more on Main Street said Senate Majority Leader Harry Reid (D-NV) today. Reid hopes to accomplish his goal with housing legislation and the Federal Deposit Insurance Corporation, which guarantees safe deposits and that transactions are fully insured.

Although banks have come down on proposed legislation, arguing that it will increase primary mortgage rates, the general consensus among four Democratic Senators today was that by reducing by foreclosures, banks will start lending and the economy will start moving again.

When dealing with credit cards, “disclosure doesn’t work anymore,” said Sen. Charles E. Schumer (D-NY). Credit card companies have become so good that more is needed to make customers aware of how much interest rates will actually cost them.

From Starbucks to Microsoft, people are experiencing job loss and it is time to be “focused on getting some confidence and stability back to families,” Sen. Patty Murray (D-WA). She said that it is time to help Americans and deal with the foreclosure crisis.

Sen. Richard Durbin (D-IL) said that he is sick and tired of being asked to give billions to banks who have no sympathy for struggling families, and if they have no sympathy than “I don’t have any sympathy for them.”

All things local, foreclosure crisis up close

By watching the news most Americans believe that there is a real crisis in the foreclosure market. This is not the held belief though of Charles Calomiris who is currently serving as a visiting scholar at the American Enterprise Institute (AEI).

Discussing whether the effect of foreclosures on housing prices has been overstated, Calomiris railed against foreclosures to start. “Foreclosures also waste resources because the vacant homes deteriorate or are vandalized. These are also problems for the lender, which is frequently holding the title to the home until it could be sold.”

Calomiris was joined by others from AEI who joined with him in their assertion that the foreclosure crisis is not as serious as some critics have stated. One voice that strayed from the pact was that of Mark Zandi who believes that foreclosures on homes should be attributed to the impact on home prices. “There is a correlation said Zandi.”

Calomiris, who is known as a professor of Financial Institutions at Columbia Business School, posed the question: “foreclosures really have small efforts on prices, they make prices go down but what is the big effect?”

If anything that was agreed upon it was that there is currently no national system to gauge the foreclosures market. Calomiris summed it up when concluding the discussion by stating “housing is a local market.”

HOPENOW offers..hope

The HOPENOW Alliance sponsored a conference call discussing the ways they have helped “distressed homeowners” keep their houses and start to bring about the end of the foreclosure crisis.

The call described the new agreement HOPENOW has implemented to help distressed families. This agreement will hopefully “streamline help”- making monetary assistance come faster to families in need. The new agreement will also hopefully alert more at risk homeowners before they find themselves in financial trouble.

Leaders of the Alliance emphasized the progress their program has had, and the steps they are making to improve their efforts. They said they are still trying to make borrowers more open to discussing financing options with the people loaning them money.