Federal government muddling housing recovery

Here’s a USA Today article that came out this morning. The article really illustrates several issues that we see on a consistent basis dealing with underwater properties here in Arizona. Regardless of what side of the aisle you stand on, there hasn’t been enough help to homeowners. Big banks and investment firms have received billions of dollars in bailouts to help them stay afloat. Conversely, the federal government has passed several programs to try and help homeowners; the problem is that these programs have been utterly ineffective in getting homeowners the help the need.

  • The federal government’s Home Affordable Modification Program (HAMP) was announced in 2009 and supposed to help 3,000,000 – 4,000,000 homeowners but has only given 883,076 homeowners loan modifications. To be honest, I’m surprised it has even helped that many people. I heard 10x more horror stories about loan modifications than I do success stories.
  • The federal government’s Home Affordable Refinance Program (HARP) has helped 928,570 homeowners while it was intended to help 4,000,000 – 5,000,000. One of the biggest problems with this program is that those homeowners who are moderately to severely underwater on their homes will not be eligible. This program isn’t helping the people that need help most; those homeowners who owe significantly more on their homes than they are worth (a market research firm puts the number of people in this situation at 11 million).
  • FHA Short Refinance program suffers from thesame problems as HARP. The investor who owns the mortgage will lose money if a homeowner who is underwater refinances to a lower rate and principal. It doesn’t make sense for the investor to do this, so homeowners will be left out in the cold. The program has refinanced less than 400 mortgages while its goal is 500,000 to 1,500,000.
  • All the programs have also caused issues at the banks like Bank of America, Chase, Wells Fargo, etc. There are so many programs and so many people are calling in to try these programs that the banks simply don’t have enough man power to service everyone in a timely manner. Plus the programs are so complicated and change so frequently that it’s impossible for the banks to stay on top of everything.

The main issue at hand is the government is not doing anything to erase the negative equity that so many homeowners have. There needs to be a mechanism that allows over leveraged properties to be valued and mortgaged at current fair market value before this mess will be behind us.

What’s your solution to this mess?

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