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What happened to the $71 billion?

By: Sam Pompeo

The Obama administration’s signature foreclosure prevention program will help only 700,000 Americans save their homes, according to a scathing report released Tuesday by the Congressional Oversight Panel (COP).

The group’s assessment falls far short of the 3 to 4 million homeowners that the president pledged would receive more sustainable mortgage loans when the Home Affordable Modification Program (HAMP) was launched in March of last
year, and is well below the 8 to 13 million foreclosures COP says are expected by 2012.

Treasury initially committed $75 billion of Troubled Asset Relief Program (TARP) funds to the HAMP initiative, which pays incentives to servicers, investors, and homeowners for each loan that is successfully modified. COP, which is charged with overseeing the use of TARP money, says it now appears Treasury will spend only $4 billion on HAMP incentives. The big question is, what happens to the unused $71 Billion?

“Absent a dramatic and unexpected increase in HAMP enrollment, many billions of dollars set aside for foreclosure mitigation may well be left unused. As a result, an untold number of borrowers may go without help,” the report said.

The members of the congress appointed panel went so far as to call the government’s loan modification program “ineffective,” and they said Treasury’s reluctance to acknowledge HAMP’s shortcomings has had “real consequences.”

Since COP’s last report on HAMP eight months ago, the panel noted that Treasury has made “minor tweaks” to the program, but COP says the changes have not resolved its core concerns.

Treasury’s authority to restructure HAMP ended on October 3, when TARP expired, and COP says because the deadline has come and gone for any major overhaul, “the program’s prospects are unlikely to improve substantially in the future.”

“Many of the problems now plaguing HAMP are inherent in its design and cannot be resolved at this late date,” the panel said in its latest report. “Other problems, however, can still be mitigated.”

This has created a huge opportunity to buy luxury home short sales. We have never seen the amount of opportunities in distressed residential and commercial real estate than right now.

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Some good news for distressed homeowners

By: Sam Pompeo

Remember we discussed the foreclosure time line in my previous blog; well here is some exciting news for all you homeowners in distress. Fannie and Freddie have once again elected to give everyone in default a big Christmas gift. They have stated that they will not foreclose on any homeowner between now and January 3^rd2011. They did however state that they will continue to process loans in default during the holiday season and move them through the system on the back end all the way to the point of Trustee Sale, but they will schedule NO sales until after the Christmas Holidays; “Merry Christmas!”

What does this really mean? Well it simply means they are further delaying the inevitable. The pipeline will continue to swell with homes slated to be sold at Trustee Sale and we will see a marked increase of sales following January 3^rd. This is a temporary reprieve and one that Fannie and Freddie adopted last year. Maybe they believe they are creating good will by delaying the foreclosure sale? All they are actually doing is ramping up the number of foreclosures to be delivered in the first quarter of 2011.

Problem with this approach is that when instructed by the Feds to cut 10% from the principle balance on all loans that are underwater they simply said NO. Interesting that the Feds would pass a bill and sign it into law and Fannie/Freddie simply thumb their nose at it. Then they throw out this crumb and expect everyone to swoon over their generosity. Who is in charge here anyway? The HARP, HAMP, and other bailout programs launched by the Feds have all failed to hit the mark helping less than .01% of homeowners in distress. Statistics show that since the launch of the HARP and HAMP less than 13,000 homeowners nationwide have actually benefited by the programs. These are Billion dollar programs and I for one want to see an accounting of where all the money went..