Administration’s Ineffective Anti-Foreclosure Program Attracts Ohio Senator’s Attention

The feckless and laggard performance of the Obama administration’s signature program to keep Americans in their homes has a Democratic senator looking for answers — and improvement in the face of a continuing U.S. foreclosure crisis.

As of Dec. 31, just 66,465 homeowners had received permanent mortgage modifications under the Treasury Department’s Home Affordable Modification Program (HAMP). That number is well below where it should be if the program were working properly. The program encourages banks to modify mortgages to prevent homeowners from falling into foreclosure. Led by failures of so-called subprime mortgages, foreclosures across the nation shot up beginning in 2007, becoming a key driver for the 2008 economic meltdown.

The performance of the four largest mortgage servicers — Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo — all continue to lag under the program. All four have converted a small percentage of the trials begun three or more months ago into permanent modifications.

“Rather than being driven by subprime mortgages as in past years, foreclosures now come as the result of more systemic problems like unemployment and medical bills,” Sen. Sherrod Brown of Ohio writes in a letter to Treasury Secretary Timothy Geithner. “In the face of these sobering statistics, I am concerned that not enough is being done to address the foreclosure problem and the burden will ultimately be put on families and entire communities.”

Brown points to the foreclosure crisis in Ohio as need to improve federal efforts that help Americans avoid foreclosure.

“National figures indicate that one in seven mortgages is now past due. Northeast Ohio, considered by many to be the front line of the subprime mortgage crisis, has been particularly hard hit. Just last week my own local paper reported a record number of foreclosures in Lorain County in 2009,” Brown adds.

Brown requests that improvements be made to the HAMP program. Fewer than 10 percent of temporary mortgage modifications have been converted into permanent modifications under the program, and Ohio has had a success rate of less than 8 percent.

“A number of changes to the program have been proposed, such as barring servicers from proceeding with a foreclosure without first considering a modification, providing consumers with a formal denial and appeal system, or creating a mediation process,” the freshman senator tells Geithner. “Ohio’s State Foreclosure Prevention Working Group has joined investor groups and consumer groups in calling on Congress to explore mortgage principal reduction to stem foreclosures. I would like to know more about what actions you and your Department plan to implement in order to increase access to mortgage modifications.

Brown also urges more federal funding for foreclosure prevention counseling programs.

“I am also concerned that the President’s [proposed fiscal year] 2011 budget reduces funding for mortgage counseling,” he says. “Foreclosure counseling is a vital service. According to a national study by the Urban Institute, homeowners who are assisted by mortgage counselors have a 60 percent better chance of saving their homes. I urge you to reconsider your decision to cut funding for foreclosure counseling. These services will continue to be essential for homeowners in Ohio, as the Mortgage Bankers Association projects that foreclosures will not peak until the end of 2010, at the earliest.”

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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