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March 2011
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The Obama foreclosure prevention plan is coming under fire this week from members of Congress. This heralded loan modification program slated to aid 3 million to 4 million homeowners in an effort to extend loan relief while helping homeowners divert foreclosure. Unfortunately this government loan modification program have fallen far short of that goal, and now a handful of Republican Congressman are reportedly ready to introduce legislation to eliminate it.  It should be noted the Bush and Obama administration have made serious attempts to stem the foreclosure crisis with numerous mortgage relief initiatives.

TARP Watchdog Says Loan Modification Plan Is Failing

Scores of homeowners aren’t getting help they qualify for, says Neil Barofsky, who is stepping down. The HAMP loan modification program was designed to lower interest rates and mortgage payments for struggling homeowners, and it has worked for around 600,000 people across the country. But critics say it should be reaching a lot more people. As lenders continue to tighten refinance loan guidelines, more and more homeowners will be in need of mortgage relief.

There are “3.3 million families who might have been reached by this program if only it had been better designed, better managed and better executed by the Treasury department,” said Neil Barofsky, the special inspector general installed to oversee the government’s bank bailout efforts. Speaking at a House hearing Wednesday, Barofsky responded to questions from North Carolina Republican Rep. Patrick McHenry, who recently introduced the legislation that would end the program. [There are] 3.3 million families who might have been reached by this program if only it had been better designed, better managed and better executed by the Treasury department.

A recent Nation Public Radio article revealed some interesting insight. TARP special inspector general, gave his thoughts regarding the Home Affordable Modification Program. Neil Barofsky has been critical of the Treasury department for not doing more to make the program work better and reach more people, and for not offering a current estimate of how many homeowners the program will actually reach. “It is somewhat shameful that at this point — here we are in March 2011 — and the Treasury department will in one breath say that, ‘Well, we know the number is not going to be anywhere close to what we originally said it would be,’ ” Barofsky said, “and then in the second breath refuse — I mean, this is such a basic failure in transparency, to refuse to tell you what their expectation is as to the total number that are going to receive permanent modifications. It evades accountability, and it’s trying to cover up a program that is clearly a failure.”

The Treasury department and Barofsky both agree that the banks and mortgage service companies have not been doing a good job.  Barofsky said. “But Treasury has done nothing to punish or penalize these loan servicers.” It would cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a loan modification programs that enable homeowners to keep their homes.

Treasury Secretary Timothy Geithner said it would “cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a mortgage modification that would allow them to stay in a home they can afford.”

According to NPR, Barofsky was critical, but did not of call for the Home Affordable Modification Program to be eliminated. Instead, he has long called for the Treasury to fix the program so it will help more people.

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