Saturday, March 27, 2010
New measures to revive U.S. housing market: Treasury
From The Hindu
In an attempt to directly reach “millions of responsible, middle-class American families struggling to stay in their homes” the United States Treasury announced adjustments to the Home Affordable Modification Program (HAMP) and the Federal Housing Administration (FHA) programmes on Friday.
According to the Treasury the adjustments to these programmes “will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.” They aim to provide greater flexibility for mortgage servicers and originators to assist more unemployed homeowners and those owing more on their mortgage than the value of their home.
The adjustments will, the Administration hopes, reach 3 to 4 million struggling homeowners by the end of 2012. The federal costs of the support programme will be funded through the $50 billion allocation for housing programmes under the Troubled Asset Relief Program (TARP). The private sector will also share a part of the total costs, according to the Treasury.
However the adjustments came under fire from some Democrats for its limited coverage: “The central issue we need to understand is why fewer than 200,000 homeowners have obtained so-called 'permanent' modifications...and what we can do to increase that number,” Representative Edolphus Towns was reported to have said at a hearing on Capitol Hill.
Republicans and other constituents levelled further criticism at the schemes: according to reports Republican Darrell Issa of California said HAMP was a “failure,” and John Taylor of the National Community Reinvestment Coalition “blasted Treasury for not showing the same urgency to help homeowners as it has for the banking industry.”
Further reports cited Neil Barofsky, special inspector general for the TARP programme, as saying that the Treasury's metric for measuring the success of the programme is “essentially meaningless.”
"Absent a thorough review...the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway," Mr. Barofsky's office reportedly said.
However the Treasury pointed to some positive results of the housing market stabilisation initiatives undertaken thus far, saying that mortgage rates had reached record lows with more than four million homeowners refinancing their mortgages to more affordable levels, helping to save more than $7 billion annually.
“More than one million homeowners are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing,” the Treasury added.
Yet numerous challenges remain, even the Treasury admitted; for example mortgage servicers were slow to implement HAMP, resulting in a slow start for the programme. Further President Obama recently said “We can't stop every foreclosure,” underscoring that government resources would be used assist to only struggling middle class families.
The Treasury reiterated that it would selectively utilise funds for of mortgage-related assistance: “Investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures…”
It further stipulated clear eligibility conditions for homeowners to benefit from the modifications under HAMP. These conditions include the requirement that homeowners “must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship.”
Similarly the FHA refinance options announced will only provide opportunities for lenders to restructure loans to homeowners who owe more than their home is worth and “the population eligible for a FHA refinance must be current on their mortgage.”
In an attempt to directly reach “millions of responsible, middle-class American families struggling to stay in their homes” the United States Treasury announced adjustments to the Home Affordable Modification Program (HAMP) and the Federal Housing Administration (FHA) programmes on Friday.
According to the Treasury the adjustments to these programmes “will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.” They aim to provide greater flexibility for mortgage servicers and originators to assist more unemployed homeowners and those owing more on their mortgage than the value of their home.
The adjustments will, the Administration hopes, reach 3 to 4 million struggling homeowners by the end of 2012. The federal costs of the support programme will be funded through the $50 billion allocation for housing programmes under the Troubled Asset Relief Program (TARP). The private sector will also share a part of the total costs, according to the Treasury.
However the adjustments came under fire from some Democrats for its limited coverage: “The central issue we need to understand is why fewer than 200,000 homeowners have obtained so-called 'permanent' modifications...and what we can do to increase that number,” Representative Edolphus Towns was reported to have said at a hearing on Capitol Hill.
Republicans and other constituents levelled further criticism at the schemes: according to reports Republican Darrell Issa of California said HAMP was a “failure,” and John Taylor of the National Community Reinvestment Coalition “blasted Treasury for not showing the same urgency to help homeowners as it has for the banking industry.”
Further reports cited Neil Barofsky, special inspector general for the TARP programme, as saying that the Treasury's metric for measuring the success of the programme is “essentially meaningless.”
"Absent a thorough review...the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway," Mr. Barofsky's office reportedly said.
However the Treasury pointed to some positive results of the housing market stabilisation initiatives undertaken thus far, saying that mortgage rates had reached record lows with more than four million homeowners refinancing their mortgages to more affordable levels, helping to save more than $7 billion annually.
“More than one million homeowners are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing,” the Treasury added.
Yet numerous challenges remain, even the Treasury admitted; for example mortgage servicers were slow to implement HAMP, resulting in a slow start for the programme. Further President Obama recently said “We can't stop every foreclosure,” underscoring that government resources would be used assist to only struggling middle class families.
The Treasury reiterated that it would selectively utilise funds for of mortgage-related assistance: “Investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures…”
It further stipulated clear eligibility conditions for homeowners to benefit from the modifications under HAMP. These conditions include the requirement that homeowners “must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship.”
Similarly the FHA refinance options announced will only provide opportunities for lenders to restructure loans to homeowners who owe more than their home is worth and “the population eligible for a FHA refinance must be current on their mortgage.”
Labels: Federal Housing Administration, Home Affordable Modification Program, homeowners, United States Treasury
# posted by Narayan Lakshman @ 12:40 PM 
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