TALF Analysts Say Loan Mods Not Working
Officials charged with monitoring the financial bailout on Wednesday criticized the U.S. Treasury Department for its handling of the housing rescue program.
Neil Barofsky, special inspector general for the Troubled Asset Relief Program, chastised Treasury for its unrealistic goals and expectations. “I fear that the growing public suspicion that this program is an outright failure will continue unless and until Treasury … comes clean with what its goals and expectations are.”
Elizabeth Warren, who chairs the bailout Congressional Oversight Panel, said, “It’s too small, it’s too slow. The program is based on the assumption that we will pay the servicers a bribe to make a deal between the homeowner and the investor who’s still holding the paper and it has not worked well.”
Source: Reuters News, David Lawder (07/21/2010)
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Treasury Plans to Push Banks to Modify Loans
The Treasury Department announced Monday steps it is taking to encourage lenders to complete more loan modifications, but critics say the new initiative doesn’t address the problems of jobless borrowers or those who are significantly underwater.
The government blames banks and mortgage companies for dragging their feet and, under the new guidelines, will fine them if they fail to increase the number of home owners given relief. It also announced plans to publish a list of the worst banking offenders and to withhold cash incentives until loan modifications are made permanent. The Treasury Department also promises to assign more staff to monitor the process.
The government said it expects 375,000 home owners to be eligible for permanent mortgage reductions by the end of 2009.
Source: The New York Times, Javier C. Hernandez (12/01/2009)
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Loan Modifications Aren’t a Right
A U.S. District Court in Minnesota determined that borrowers don’t have a right to loan modifications.
The decision came in response to a lawsuit by Minnesota home owners that maintained that borrowers had a right to loan modifications. The lawsuit sought class-action status.
The lawsuit alleged that the Obama administration’s foreclosure prevention plan violated borrowers’ constitutional rights because home owners who were denied help under the program weren’t given a written denial and an opportunity to appeal. The suit sought to halt foreclosures on home owners eligible for the Obama plan until the government put in place certain procedural safeguards, such as creating a formal appeals process.
In Monday’s decision, U.S. District Court Judge Ann Montgomery said that modifications weren’t an entitlement and pointed out that the Treasury Department gave mortgage companies discretion in evaluating the borrowers it helps.
Source: The Wall Street Journal, Ruth Simon (09/11/2009
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Treasury Makes Refinancing More Attractive
The Treasury Department on Wednesday expanded its foreclosure prevention plan, lifting the current 105 percent loan-to-value cap to refinance up to 125 percent of a home’s value.
Applications to refinance mortgages have fallen as rates have increased in the last couple of weeks, but this move may bring more borrowers to the table.
At the same time, Fannie Mae and Freddie Mac have agreed to reduce the processing fee for borrowers who select a 25-year mortgage.
Fannie said in a statement, “The reduction is intended to lure borrowers to select shorter terms and build positive equity in their homes sooner than with a typical 30-year mortgage.”
Source: Reuters News, Patrick Rucker (07/01/2009)
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Freddie Mac gets another $6.1B from government
NEW YORK — Battered mortgage giant Freddie Mac received $6.1 billion in new funds from the Treasury Department to help offset its mounting liabilities, according to a regulatory filing submitted Wednesday.
The company could also be close to naming a new, permanent CEO, according to a report in The Wall Street Journal.
The Federal Housing Finance Agency, which has been operating Freddie Mac since last fall, requested the funds for Freddie Mac after the mortgage firm’s liabilities exceeded its assets by more than $6 billion, according to the filing with the Securities and Exchange Commission.
After drawing the funds, Freddie Mac has now received $51.7 billion from the Treasury Department and still has access to an additional $149.3 billion to help it finance operations. Full Story.
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