The number of homeowners facing foreclosure that have permanently-reduced mortgage payments was up to 116,000 in January, almost double the number from the previous month, the U.S. Treasury and the Department of Housing and Urban Development (HUD) announced today. The January update for the government’s Home Affordable Modification Program, HAMP, also showed that an additional 76,000 borrowers are pending permanent modifications.
Bank of America said it has provided permanent mortgage relief to 12,700 borrowers facing possible foreclosure as of January, up from 3,200 reported the previous month under the government’s Home Affordable Modification Program (HAMP). The nation’s largest mortgage lender, which had faced some criticism late last year for its conversion rate, reported today that it has another 13,700 permanent modifications that “are pending, meaning final modified loan terms have been approved and documents have been sent for the customers’ signatures.”
More than 200 community banks, thrifts and credit unions in neighborhoods hardest hit by the recession will receive low-interest capital to boost small business lending, the U.S. Treasury has announced as part of a new effort under its bailout program. The $1 billion initiative under the Troubled Asset Relief Program, TARP, targets Community Development Financial Institutions, lenders certified by the Treasury as providing more than 60 percent of their small business lending and other economic development efforts to “underserved communities.”
President Obama today formally launched his already-controversial proposal to re-direct $30 billion in bailout funds into community banks to bolster small business lending. “The more loans these banks provide to credit-worthy small businesses, the better a deal we’ll give them on capital from this fund,” Obama said in prepared remarks. The program would provide better rates on risk-related capital to banks that boost lending to small businesses.
A somber and pessimistic assessment of the government’s bailout program has been issued by the official overseer of the $700 billion Troubled Asset Relief Program (TARP) – concluding that the fundamental problems in the U.S. financial system are still in place for another crisis. The report also looks pessimistically to the re-focused future role of TARP funds for increasing small business lending and helping desperate homeowners avoid foreclosures as outlined in recent weeks by President Obama and U.S. Treasury Secretary Timothy Geithner. But the “leverage” U.S. officials had over the major banks is now gone, putting in doubt the effectiveness of a new lending pipeline to small businesses.
U.S. Treasury and Housing and Urban Development (HUD) officials today announced new paperwork guidelines to speed up permanent mortgage modifications for borrowers under the government’s beleaguered foreclosure rescue program. The new rules require key documents – including proof of income – from homeowners before initiating a trial modification. The upfront requirement is meant to accelerate the process at end of trials – when borrowers are evaluated for permanent relief with the reduction of monthly payments by hundreds of dollars. Previously, the paperwork was required after trial start-up.
Bank of America, the nation’s largest lender, has become the first to agree to modify second-lien mortgages in a yet-to-start new component of the government’s much-criticized foreclosure rescue program. “The formal action follows a verbal commitment to the program made by Bank of America’s Chief Executive Officer Brian Moynihan during a meeting with Treasury Secretary Timothy Geithner earlier this month,” Bank of America said today in a statement.
U.S. Treasury Officials plan to “revamp” its mortgage modification program in coming days, responding to intensifying criticism and a growing consensus that it is having a small impact on the ongoing foreclosure crisis. The New York Times reported this week that Treasury officials have been in talks with mortgage servicers to expedite the $75 billion Home Affordable Modification Program, or HAMP. The program provides incentives to servicers who help struggling homeowners into mortgage reduction trials, and then place them into permanent relief with lower monthly payments.
One of the most prominent small business associations is effectively telling the Obama Administration that it doesn’t want the Treasury’s bailout program shifted to help reinvigorate small business lending. The National Federation of Independent Business has gone even further by voicing support for an amendment that would stop any new initiatives with unused or repaid money under TARP, the Troubled Asset Relief Program – most notable for its big bank bailouts.
Frustrated by a lack of principal forbearance in the government’s mortgage modification program and the prospect of ‘drowning’ in underwater equity for years, some homeowners are opting to walk away – instead of going with a foreclosure rescue. The primary number reported by the Treasury: 112,521 modifications made permanent or pending such status through December. But only 17,280, or 26 percent, of permanent modifications approved and completed nationwide included either a reduction in principal or a temporary reduction that is re-administered to principal at the loan term’s end.