Federal Foreclosure Aid Programs Fall Short of Goals

Market research firm CoreLogic reports that over 11 million homes are underwater, meaning homeowners owe more on the mortgage than the market value of the house. CoreLogic data showed that 15.7 percent of mortgages in New Jersey alone were underwater. The federal government has passed a number of programs designed to prevent foreclosures, yet those programs have helped a relatively small percentage of struggling homeowners and have done little to stem the foreclosure crisis in the country.

Helping Few Homeowners

While federal programs have helped some homeowners, the number they have assisted fall far short of the programs' initial goals. The government dedicated almost $46 billion to fixing the housing crisis in 2009. However, as of November 2011 the government has only spent $2.8 billion of that fund, according to Treasury Department data. USA Today reports that 2.6 million foreclosures have occurred since 2009, and another 4 million homes face foreclosure, showing that federal programs have been largely ineffectual in their aims.

The Home Affordable Modification Program helped 883,076 homeowners obtain permanent loan modifications. However, the program was supposed to help 3 to 4 million homeowners. The program expires in December 2013, and experts estimate that the program will have only prevented fewer than 800,000 foreclosures by that time.

The Home Affordable Refinance Program assisted 928,570 homeowners with refinancing to get lower interest rates for their mortgages. However, lawmakers intended HARP to help 4 to 5 million homeowners. The people the program did help were not those who were deeply underwater in their mortgages and needed help the most.

Criticisms of the Programs

Critics point to a number of reasons that the programs failed. Many allege that mortgage services performed their jobs poorly, losing documents, failing to staff properly to handle the number of applications for the programs and not communicating with borrowers.

Those in the mortgage industry contend that the government made it nearly impossible to participate in the program due to the frequent changes in the rules. For example, the Treasury Department issued 100 rule changes for HAMP in a three month period.

Others suggested that the monetary incentives that the programs offered to mortgage lenders to participate in the programs were not high enough to entice lenders to participate, which stymied the programs' reach.

Critics allege that the lack of oversight in the programs was also a problem. There was no monitoring to ensure that the lenders who did participate actually complied with the rules of the programs. A number of consumers complained about abuses in the program.

Homeowners facing foreclosure may feel that they have no options, given the limited help that federal foreclosure aid programs have offered. However, there are ways to prevent foreclosure, such as bankruptcy. If you are underwater on your mortgage, consult an experienced foreclosure defense attorney today.