My New Blog

With billions of dollars infused into the banking industry and promises to rescue millions facing foreclosure, some are beginning to wonder if the government has been serious about helping struggling homeowners. One of the early efforts, the Hope for Homeowners program, announced in the fall of 2008, has been recognized as a complete disaster, resulting in only 51 modifications. And, the latest news is even worse; 50 of those modifications are now being investigated by the FBI for potential fraud.

Newer efforts such as the ambitious sounding, Making Home Affordable program, a commitment of $75 billion for loan modification, will fall far short of its promised goal. Why is it that the government, with all its power and with billions of dollars (our money) can’t develop a workable and efficient system that can truly aid those facing foreclosure? The answer lies in both the approach and the intent. Homes have lost so much value in the past two years, that the government’s efforts are insufficient to have a meaningful impact. The amount of money required would be far greater than they have available. In fact, they have no money available, for they’ve been forced to borrow the trillions already spent.

I don’t expect to see dramatic and long-term benefits from any of the programs announced to date. Unfortunately, some homeowners seeking relief simply do not qualify for help. For many, declining credit ratings or reductions in income, combined with the loss of their home’s value, rules out the possibility of modification. And, a good portion of those who do receive a modification will be unable to maintain the payments on a new mortgage because of their precarious financial situation. Many have already fallen behind on their modified loans at a default rate that in some areas has run as high as 60%.

While the government would like for us to believe that they are concerned and making efforts to solve the foreclosure problem, they’re aware of the facts. And a significant fact is: Government can’t save 9 million homeowners from foreclosure or anywhere near that number, and they never expected to do so. Just like their other promises to restore the economy, stopping the foreclosure juggernaut sounds good, but it’s not something they are seriously committed to doing.