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Is There a Wikipedia to Go Dark for Homeowners?
David M. Abromowitz
Senior Fellow at the Center for American Progress
Posted: 02/ 6/2012 5:44 pm
When Congress was on the brink of pushing through legislation that Internet advocates opposed, over four million online signatures were gathered quickly. Congress relented.
Today, millions of American households are poised to benefit directly from the opportunity to reduce mortgage payments, avoid foreclosure, build up some savings, or have a few thousand dollars to spend a little more freely. Yet while even conservative economists believe that easier refinancings will boost the economy and help millions more families — a major part of Congress is ready to say a big, “No, let’s not even try.”
Not a day elapsed after President Obama outlined a more ambitious set of proposals to let average families take advantage of the same low interest rates that have benefited upper income households and large corporations before Speaker Boehner among others declared the idea dead on arrival.
“All [the refinancing plan] does is delay the clearing of the market,” Speaker Boehner told reporters. “As soon as the market clears and we understand where the prices really are — [that] will be the most important thing we can do in order to improve home values around the country.”
Saying millions of families should wait until the “market clears” is the modern equivalent of “let them eat cake.” Clearing the market is an economist’s term for letting the tidal wave of foreclosures continue. But unchecked foreclosures drag down everyone’s home values, let vacant homes pile up in neighborhoods, and force families to choose between struggling to make needlessly high mortgage payments or become another default statistic with ruined credit.
It is time to ask lenders and investors to shoulder some of the burden, and Congress should be taking the lead on this, not finding objections. As my colleagues at the Center for American Progress and I explain in detail, the principles of accountability to avoid more foreclosures — especially for families who haven’t missed payments — is at the core of the administration’s expanded proposal for making refinancing easier.
Families with mortgages, however, are not an easily organized constituency. Unlike the protesters most engaged in social media who were the bulwark of those moved to criticize SOPA and PIPA, borrowers are not necessarily the internet generation nor an easily reached interest group.
But given the politics of “embrace the opposite of what Obama proposes,” homeowners struggling to keep making payments could use a Wiki dark day of their own. And so could the tens of millions of others who live next door, as no neighborhood really wants another foreclosure.
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80 Percent Of Homeowners Behind On Mortgage Ineligible For Loan Modification Program
Less than 20 percent of homeowners who theoretically qualify for a government mortgage modification are actually eligible, according to data released Monday by the Treasury Department.
Although roughly 4.6 million U.S. homeowners have missed at least two mortgage payments — making them technically eligible for Making Home Affordable, the federal government’s flagship homeowner assistance program — a whopping 80 percent of those borrowers cannot be helped by the program. According to the Treasury report, just 900,000 homeowners actually qualify for a loan modification under Making Home Affordable.
Dean Baker, an economist and co-director of the Center for Economic and Policy Research, said that fact reflects the program’s low goals. “If 900,000 are eligible, and this is your main program for helping underwater borrowers, and we know that not all 900,000 can be helped, this doesn’t look very ambitious,” he said.
The numbers reinforce just how far short the program, initiated by President Barack Obama with much fanfare in early 2009, has fallen short of its goals and fuel critics’ assertions that the program is largely ineffective. “This program, in its design, is set up to help a very small portion of people,” said Baker.
(Under Making Home Affordable, homeowners who aren’t yet delinquent in mortgage payments but are at risk of imminent default might also qualify for loan modifications. The Treasury data did not include that population.)
Borrowers are locked out of the federal program for a myriad of reasons, including the kind of loan they have and the property at issue. Not covered by the program: rental properties, “manufactured” homes, homes with Federal Housing Administration loans, and homes with Department of Veteran Affairs loans.
Many borrowers can’t get help because their monthly mortgage payment is deemed affordable, irrespective of whether it actually is for the borrower. The idea behind the loan modification program is to make the monthly mortgage payment more affordable, defined as a payment that is less than 31 percent of the borrower’s total monthly debt payments (think car payments, student loans, credit cards, etc.). One-third of homeowners who would otherwise qualify are ineligible because they already have a mortgage payment that meets this criteria, according to the Treasury report.
Borrowers who have abandoned their property are also ineligible, the assumption being that they are not committed to their home.
“If you look at the large number of vacant properties, I think that speaks to the fact that, in many cases, the borrowers were reached too late in the game,” said Baker. “The borrower assumed they’d lose their home so they walked away. You could say those people aren’t eligible, but they might have been if we’d reached them earlier.”
Source: Treasury Department report.
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Building Community, One Household at a Time 