Mortgage aid plan participation falls short

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WASHINGTON --- Only one in three homeowners who have signed up for the Obama administration's mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government's effort to stem the foreclosure crisis.

The poor results from the mortgage industry drew sharp criticism from House Financial Services Committee members Tuesday. Since the program was launched in March, lenders have made loan modification offers to just 680,000 borrowers, far short of the administration's goal of up to 4 million.

"Taxpayer-funded foreclosure mitigation programs have been an abject failure," said Rep. Jeb Hensarling, R-Texas, at a hearing on the program. "Throwing more money at programs that do not work is absolutely insane."

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years.

They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.

On Thursday, the government plans to release the first figures on how many modifications have been made permanent.

Much of the criticism for the disappointing results is being leveled at the banks, many of which received billions in taxpayer bailout dollars. Calls are growing louder on Capitol Hill for the Obama administration to take a tougher approach.

"We haven't spanked anybody," said Rep. Emanuel Cleaver, D-Mo. "I think they've come to the conclusion that spankings are not on the agenda ... Why can't we do something to one of them?"

Herbert Allison, the Treasury Department's assistant secretary for financial stability, said punishment could be in the works.

"We're putting them on notice," he said. "We will exact penalties ... and be publicly outspoken about who's performing well and who's not."

Lenders, however, say the majority of borrowers either don't complete the paperwork or don't make the payments.

A record 14 percent of homeowners with a mortgage are either behind on their payments or in foreclosure.

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donkeywhisperer
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donkeywhisperer 12/09/09 - 08:16 am
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Honk if I'm paying your

Honk if I'm paying your mortgage!

ron_rlw
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ron_rlw 12/09/09 - 01:15 pm
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Let me see if I understand

Let me see if I understand this ... people are applying for the plan through the banks and then the people are not returning the paper work ... and just how is that the Bank's fault?

Maybe the "Obama administration's mortgage relief plan" has developed too complex of an application process for their target audience to be able to complete.

But I do understand this point ... I don't get any help since I've been able to pay my mortgage.

sugarcane
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sugarcane 12/09/09 - 06:55 pm
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I couldn't agree with you

I couldn't agree with you more. I am responsible, did not over extend, and I am paying my mortgage on time, including extra principal. I purchased at a higher interest rate in 2007, my property value has dropped, and yet, I cannot take advantage of the government programs. "Why," you ask. Because I do pay my mortgage on time. I have to do a regular refinance---an FHA at that unless I want to pay even more money out of my pocket to get a good LTV. Doesn't seem balanced to me.

sugarcane
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sugarcane 12/09/09 - 06:58 pm
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For those of you who aren't

For those of you who aren't familiar with an FHA loan, this means I have to pay an upfront mortgage insurance premium of 1.75% of my loan amount. Sort of defeats the purpose of working so hard to pay down my principal.

sugarcane
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sugarcane 12/09/09 - 08:12 pm
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For those of you who aren't

For those of you who aren't familiar with an FHA loan, this means I have to pay an upfront mortgage insurance premium of 1.75% of my loan amount. Sort of defeats the purpose of having worked so hard to pay down my principal.

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