Mixed Signals from Obama's Foreclosure Rescue Team

Foreclosure rescueObama Administration officials touted eight months ago a program they said was vital for at least half of all homeowners facing foreclosure – one that helps reduce the payments of a second lien.
This week, blogs are abuzz on speculation that the second lien modification program was placed on indefinite hold. One blog relayed an e-mail reportedly from a government source saying the plan had not signed up any mortgage servicers.
Then a U.S. Treasury spokesperson denied that the program was shelved, but added that it has met with some challenges in ramping up. In its clarification of the program’s status, the Treasury may have created more confusion, and possibly concern about the overall effectiveness of the government’s umbrella mortgage-relief effort, HAMP – Home Affordable Modification Program.
A Congressional panel last month heard an earful from mortgage industry experts about HAMP’s shortcomings. Much of the criticism centered on its failure to address mortgage principal reduction, negative equity and second liens – all factors that contribute heavily to borrowers failing mortgage modification trials.
“The program’s effectiveness has been hampered by a severe problem with servicer capacity, by a piece-by-piece rollout of complementary programs addressing second liens and short sales, and by lagging compliance, data availability, and appeals procedures,” Julia Gordon, Senior Policy Counsel at the Center for Responsible Lending, told the U.S. House Committee on Financial Services.
This week, the following explanation was given by Treasury Spokesperson Meg Reilly to HousingWire.com on the reason for the second lien program’s delay:
“Treasury has been working to create program infrastructure and technology, including a new platform that matches second liens to first liens modified under HAMP…Because there has not been a systematic method of notification to second lien holders when a first lien on the same property is modified, ramp-up has taken some time.”
No timetable has been provided by the Treasury on the program’s launch.
On April 28, 2009, Treasury officials announced the second lien program in a press release that stressed the need to help “underwater borrowers stay in their homes.”
The Treasury’s press release at the time said: “Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50 percent of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien.”
A new brochure for borrowers looking for mortgage relief was recently posted by HAMP administrators on its website for mortgage servicers. In a question-and-answer section, the issue of second mortgage modification is only briefly addressed.
“Some second liens can be modified or even paid off through the Home Affordable Second Lien Program. Your mortgage lender can tell you if your second lien is eligible,” reads the HAMP brochure.

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