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One of the responses you often get from official sources about the failed HAMP program is that it was but one of a string of programs implemented using TARP funds to help homeowners. So just because HAMP has used barely $3 billion of the $50 billion in available funds, that’s not a full picture, because some of that money was cleaved off to other programs. Among the biggest was the Hardest Hit Fund, a $7.6 billion program from Treasury designed to help unemployed borrowers in the hardest-hit states. The states would have some discretion into how the program money would be used, but by and large they would either use forbearance or principal reductions to save the homes of the suddenly unemployed until they got back on their feet.
Only thing is, the Hardest Hit Fund apparently has the same kind of miserable success rate as HAMP.
A $7.6-billion federal program to help unemployed homeowners stave off foreclosure has provided little relief two years after being unveiled, with less than $218 million of the money paid out to needy borrowers as of Jan. 1.
California, which was allocated nearly $2 billion from the Hardest Hit Fund, provided less than $38.6 million in assistance for 4,357 borrowers by the end of last year, according to the state’s latest report to the Treasury Department.
That amounted to less than 2% of the federal funds available to the state’s Keep Your Home California program.
“It’s about helping the homeowner, and that’s not happening,” said Bruce Marks, head of the foreclosure counseling group Neighborhood Assistance Corp of America. “As we speak, there are thousands of people losing their homes.”
The Hardest Hit Fund launched in August 2010. So that’s a 2% payout rate in 16 months.
As this is a state-run program, I can hear the alibis from Treasury now, that they cannot be blamed for state bureaucracies and bottlenecks. First of all, if they had an inkling that would be a problem they could have commandeered the program. Second, the fact that even states where the program has been aggressively promoted can’t spend the money points to a serious design flaw:
…State and federal officials said California’s Employment Development Department declined to mail information about the program to laid-off workers applying for unemployment benefits, citing legal constraints.
In Oregon, state labor officials aggressively promoted the program to residents on unemployment. It led to 16.4% of the available federal funds being distributed as of Dec. 31 — the most of any state.
When your star pupil is getting 16%, the test is the problem, not the students.
One part of this is the low priority placed on savings homes, at least when compared to the priority placed on saving banks. Government would not fail to make banks aware of any opportunities. But in addition, once again, the program put a lot of discretion in the hands of the lenders. California, Nevada and Arizona teamed up to create a plan to match any principal reductions from lenders dollar-for-dollar, doubling the benefit to the borrower. And the banks, along with the GSEs, simply rejected the plan. Only now has California hit on the idea to give the money directly to the homeowners without needing sign-off from the lenders. But so far they’re only “considering” the idea.
The banks chime in with the claim that the homeowners are declining participation in the Hardest Hit Fund program. Mm-hm. This is more of the “wave of strategic default” propaganda we’ve been seeing. To be clear, homeowners should look rationally at their situations and, if it makes sense, leave their mortgages behind. But statistics show that almost nobody does that, even during the foreclosure crisis. It just hasn’t happened, for whatever reason (I think there’s been a deeply ingrained moralism surrounding this, partially because of the bank PR).
And then there’s this curious paragraph:
A recent $25-billion settlement struck by state attorneys general and the Justice Department requires the five largest mortgage servicers to reduce billions of dollars in principal. That deal raised hopes of higher participation in the California, Arizona and Nevada programs by servicers who could help borrowers further with the additional matching funds at no cost.
We still haven’t seen settlement terms. But this makes it sound like banks could use the Hardest Hit Fund to get credit under the settlement as well. The programs vary from state to state, and I don’t know all the ins and outs. But the possibility exists that some of the programs give taxpayer money to banks as an incentive to forbear or reduce principal. In which case, once again, banks could get a payout for meeting their obligations under the settlement. At any rate, just by doing the loan modifications per their obligations, they would make failed programs like this Hardest Hit Fund look better.
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It’s discouraging that CA is only “considering” giving some of the Hardest Hit Funds to the people who are, well, hardest hit. It seems the not looking backward ruse is in play here, which is very curious since dispensing that money directly to the people does not entail what our politicians and officials seem to dread most–holding the banks responsible. Meanwhile, a new e-mail is circulating this am from Kamala Harris and the Courage Campaign urging people to pledge to help pass the California Homeowners Bill of Rights. It is strictly a looking forward proposal. Gah.
Here in Illinois, it was decided to cap the program at $25,000 per homeowner. For someone who has been unemployed for so long that they exhaust their unemployment benefits, and could not have continued paying the exhorbitant mortgage cost with their meager benefit anyway, the average person would have owed at least twice that cap by the time they could even apply for the help.
There literally is no program available to such unemployed homeowners that will help them save their home. Even the recently started year-long forebearance plans offered by Fannie and Freddie are being denied to these people because the bank or servicer is lying to them by claiming they have no knowledge of such a plan.
I will tell you precisely why this money has been withheld from the newly poor. It is because the people in charge of the money are mean, self righteous, and jealous.
The PTB think, “Why are those people getting this free money, and I don’t get any?” (Well, because you still have your job, asshole!) So they stall the project and make it impossible for their neighbors, the new deadbeats, to get the “free money”.
When I was a young architect in Chicago, I worked for a firm designing a new public housing project. We brought the building in under budget and were set to go, but the PTB said, “why do those people get a balcony, I don’t even have a balcony!” They killed the project.
It is “keeping up with the Jones” in reverse, and it seems to be universal. People do not seem to mind someone they do not relate to being filthy rich, but they universally hate it when their neighbor does well. “Keeping the Jones down, so you can feel superior”, is closer to the mark. It is the emotion behind the new favorite term, “moral hazard”. “If we help the beggar in the corner, then everyone will quit their job to get free handouts on the corner”.
It is bullshit. It is mean. But it is human nature. Just read the conservative blogs on the subject of the foreclosure settlement. It is all they talk about. “Why should some deadbeat that didn’t bother to pay his mortgage get a $2000 benefit? What about me, I pay my mortgage, where’s my money?” Sigh.
Well said. It was to be “float all boats”. Now it’s “sink ‘em all”–except mine, of course. Meanness, very deep-seated meanness.
Ooops. “It used to be ‘float . . . “
Look, it’s the fees. It’s no different than when the banks lied under oath and said that homeowners rarely try to get a “work out” plan as my bank GMAC was testifying that homeowners never try to get a work out plan, the bank was sending me letters and refusing my calls. There is something to these patterns. This is just one example of the many ways they “fake” as if they are using the rules or “trying to help”. It’s all a charade. Until we get to the bottom of what is really going on, and understand why it’s so important for them to keep up this lie, that they are “trying” but these darned homeowners are just too stupid to see they can’t afford their homes…we will not be able to fix the problem. There is a reason they blatantly lied. There is a reason they keep lying. The one pattern that will not break are the fees. They will NOT stop, and they will not try to work out these loans. They will “pretend” that they are trying. We need people to go through these loans and witness the process. But the problem is that the pay off numbers are not correct. No one is going through the loans to insure that the figures are realistic. No one is checking the accounting, no one is checking the bottom line.
I can make a prediction based on 11 years of watching them pull one trick after another. They aren’t going to work it out, they will blame the homeowners. There is something else going on, that they are trying desperately to keep from the public eye.
Book Salon up with Andrew Bacevich’s The Short American Century: A Postmortem hosted by Robert Farley
2% in 16 months? Where can I invest? That is a good return these days. I have a substantial money market account I keep for ready funds in case of emergency making 0.15% and a checking account making zip.
I’m in the business, in CA and this is the first I’ve heard of the hardest hit fund. If it required principle reductions, I’d have passed on recommending it, because I’ve yet to see a principle reduction.
Re $25,000 cap – from the article:
“California, Nevada and Arizona jointly devised a plan to provide mortgage relief funds to struggling borrowers only if banks and loan investors agreed to reduce the principal owed on the loan by a matching amount. For instance, a $25,000 principal reduction from the lender would be doubled, producing a $50,000 benefit to the borrower.
State officials say banks, loan investors and the government-owned mortgage giants Fannie Mae and Freddie Mac declined to go along with the plan.
“I think the biggest reason is the banks are not participating in the principal-reduction piece,” said Diane Richardson, legislative director for the California Housing Finance Agency, which developed the state’s program. “They are choosing not to participate for whatever reason.”
California is now considering helping homeowners without lender participation, state housing agency spokeswoman Evan Gerberding said.”
I was told by someone in this program (Hardest Hit Fund) that a homeowner couldn’t be more than $2,500 behind in their mortgage payments (which is a little over two months). Do you think that she meant $25,000 instead?
These programs are not about helping anyone, they’re just PR for O’s reelection run. He can speechify about all the programs he’s established to help homeowners knowing that no one will check their efficacy.
The model is Dreams. He talked all about the community orgs programs and the people involved but did no evaluation of whether they did any good. That’s one of the tells that got me onto O to begin with.
FISA did it for me.
Such ignorance. The banks make bilions in fees by foreclosing that is why they are being sued by Attorney Generals (like AZ) for consumer fraud.
They are only the servicers and only make big money by foreclosing, owning, managing and reselling. In about 70% of cases the taxpayer takes the huge foreclosure sale loss.
HAMP and all the other addons are great. The Net Present Value test proves it is in the best interest for whoever owns the mortgage to modify vs foreclose.
But the banks lie, delay, pretend because the bank that services the mortgage doesn’t own it in almost all cases. Modification help the taxpayer or the investor if in a pool with no GSE behind. Modifications hurt the servicer who loses fees and makes billions by foreclosing not modifying.
We now have fed up ex bank employees in modification depts speaking out and exposing the truth behind the bankers scams to shift the foreclosure losses to taxpayers while they make $billions on the foreclosures.