More Must be Done to Stop Foreclosures

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Foreclosure filings were at historic highs in March -- 367,056 -- an increase of nearly 19 percent from the previous month, and the highest monthly total since 2005, according to RealtyTrac. Almost two years after the onset of the financial crisis with unemployment at historic highs, nothing is being done to put a stop to this on-going tragedy.

Today, the Real Economy Project of the Center for Media and Democracy (CMD) released an update of our Wall Street Bailout accounting that, unlike other bailout assessments, includes Federal Reserve loans. CMD finds that the Federal Reserve, the U.S. Treasury and Federal Deposit Insurance Corporation (FDIC) combined have disbursed a total of $4.7 trillion on the bailout, of which $2 trillion is still outstanding.

A Deeper Look at the Housing Issue

This month, CMD took a closer look at the housing issue. Our assessment also shows that the Federal Reserve and the U.S. Treasury have disbursed $1.6 trillion in an effort to prop up the mortgage investment market through purchases of mortgage-backed securities and Fannie Mae and Freddie Mac debt. The majority of this money was from the Federal Reserve, and was not subject to Congressional debate or approval.

Yet, at the same time, the U.S. Treasury Department has spent a small fraction of this amount, $90 million, on the Home Affordable Modification Program (HAMP). HAMP is the only Congressionally-authorized program that is actively spending money and designed to prevent foreclosures.

$90 million is a pittance in the face of the foreclosure onslaught, (the program is authorized for much more), but these funds are being subject to strict scrutiny by the Troubled Asset Relief Program (TARP) Congressional Oversight Panel, headed by Elizabeth Warren. Her latest figures document the abject failure of this program to stem the crisis. As of February 2010, only 168,708 homeowners have received final, five-year loan modifications -- a small fraction of the 6 million borrowers who are presently 60+ days delinquent on their loans.

More Needs to be Done

More must be done to stop the daily tragedy of American families losing their homes. $1.6 trillion has gone out the door with little discussion or debate on Capitol Hill. Congress should give the Federal Reserve funds the same level of scrutiny that HAMP has received and consider attaching some strings to these funds to force banks to do more to assist American households. With 30 million Americans still unemployed or underemployed, housing experts and policymakers need to go back to square one on this issue to figure out how to best aid homeowners and devastated communities for the long run.

The Senate also needs to move on Federal Reserve transparency and accountability. Our Wall Street Bailout accounting illustrates that the bailout it still underway, and it underscores the need for a full and public audit of the Federal Reserve and all of its programs. The Senate financial reform package includes an extremely limited audit of the Federal Reserve, which withholds key information from the public for extended periods of time. An amendment will be offered to the Senate bill to apply the more robust Ron Paul-Alan Grayson audit language from the House financial reform bill.

Learn more about the 35 programs included in CMD’s bailout tally by visiting our Total Wall Street Bailout Cost Table, which contains links to pages on each bailout program with details including the current balance sheet for each program. CMD also publishes a Financial Crisis Tracker, a widget for the table that can be downloaded to websites to get up-to-date numbers on the financial crisis and the bailout.

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The foreclosures are not

The foreclosures are not because of jobs it is because it is a domino effect People are letting their homes go to foreclosure because nobody does anything about it . The banks do nothing about it when they stop making payments. They make it easy they let them live their for a year for FREE!!!!!!!!!! Why wouldn't they let their home go it is easy They just leave and go purchase another one for 1/2 the price how ridulous wake up and do not let people just get away with stop making payments and living in their homes for free. One person tells another and so on forever STOP THEM!!!!!!!!! It is not about bailing them all out . their will be no end to that stop making it so easy to leave!!!!!!!!!!!!!!!!!!It is not fair to honest ciitzens who make their payments they are the ones getting punished

HAMP

"Congress should give the Federal Reserve funds the same level of scrutiny that HAMP has received and consider attaching some strings to these funds to force banks to do more to assist American households."

While I agree with the larger premise of this statement, what is not mentioned is the utter failure of HAMP to follow through with oversight on the banks which have been using and ABUSING the program - and surprise, surprise, to their advantage. ProPublica had an excellent piece recently exposing the the mortgage company that has the worst track record in this regard, Saxon:
"No Penalties for Mortgage Company with Worst Loan Mod Backlog"
I would put a link to it here, but it's preventing me from posting this comment (the auto-spam filter).

Essentially it's about how banks utilizing the modification program are leaving their homeowners in limbo, often doubling and even tripling the required trial-payment period (3mo.) before making an offer of properly adjusted rates, and then foreclosing on them (some without notice and even while telling them they are approved) despite the homeowners making the MUCH higher trial-payments for far longer than they should have been required to do so. Consumer advocacy groups say many of the homeowners which went into foreclosure in the HAMP program are worse off than they would have been had they NOT entered the program too.

One thing that the ProPublica article doesn't address, and I believe is what's encouraging banks to foreclose and resell out from under owners is banks cashing in on foreclosure insurance! To me, the question is simple; why else would banks go through the trouble of foreclosing and selling to somebody else? Especially when banks sell these homes for a price much lower than the original mortgage, and that price is also what the original owners are often willing to pay anyway too. So I believe the banks are covering their losses (depreciation) this way; extending the higher trial-payments (well beyond the known means of the homeowners), foreclosing on the homes, cashing-in on the foreclosure insurance, and then reselling the home.

And...

In addition to the the banks covering their losses (depreciation) this way; extending the higher trial-payments (well beyond the known means of the homeowners), foreclosing on the homes, cashing-in on the foreclosure insurance, and then reselling the home...

Let's not forget that the banks have also received quite a bit in incentive$ for the modification program too. See ProPublica's page, "Making Home Affordable -
The Mortgage Loan Modification Plan" - it shows how much each bank is to receive.

107 recipients
$47.9 billion promised
$130 million actually invested, loaned, or spent