Mortgage modification programs under fire from Republicans
The federal mortgage modification program is fast becoming a target for criticism as a failed program. Congressional Republicans have announced intentions on scrapping federal mortgage relief programs, which have been dismal failures. Foreclosures on failing mortgages have slowed, but procedural issues are hampering the foreclosure processes nationwide.
Failed mortgage relief programs prime target for spending cuts
Congressional Republicans are taking aim at failing programs that throw money down the drain, and mortgage modification programs are prime targets, according to CNN. Republican members of the House of Representatives have announced intentions to put federal programs aimed at saving failing mortgages on the chopping block in order to cut about $38 billion in instant cash from the budget. The Home Affordable Modification Program is a prime target, as Inspector General for the Troubled Asset Relief Program Neil Barofsky described the program as a failure.
On the chopping block
Other programs slated for demolition include the Neighborhood Stabilization Program, refinance programs under the Federal Housing Administration and the Emergency Homeowner Relief Fund, all of which lend emergency loans to aid troubled mortgages. However, these programs haven’t been smashing successes, either. Spencer Bacchus, a Representative from Mississippi and chair of the House Financial Services Committee, said that “it’s time to pull the plug” and end programs that don’t work. Only about 500,000 permanent mortgage modifications have been performed on troubled mortgages through these programs, which is a success rate of less than 50 percent. Foreclosures are also taking far longer to process.
Foreclosures take longer
Because of new procedural rules for foreclosure and increased scrutiny of foreclosure practices, loan lenders are taking far longer to foreclose on a home, according to USA Today. A distressed homeowner will spend about 19 to 20 months living in a foreclosed home at current rates, which may increase to 22 to 23 months. The average person in a foreclosed home would normally have gone 250 days without making a payment prior to the mortgage crisis, but that stretched from 410 days in January 2010 to 507 days in December 2010. Increased scrutiny due to the “robo-signing” controversy has led to foreclosures taking far longer, which causes loan lenders to lose considerable amounts of money.