Tax Credit Extension Closing Deadline

Friday, March 11th, 2011, 11:37 am

The House of Representatives voted 242-177 Friday to end a new program that would provide interest-free loans to aid unemployed borrowers with their mortgage payments.

In January, the Department of Housing and Urban Development said the Emergency Homeowner Loan Program, created under the Dodd-Frank Act, would begin taking applications in the spring of 2011. HUD set aside $1 billion to provide up to $50,000 in interest-free loans covering mortgage payments for up to 24 months. Roughly 30,000 homeowners are expected to take part in the program.

Texans are slated to receive the most funding through the program. HUD designated $135 million for unemployed borrowers in the state, followed by $111.6 million for New York and $105 million for Pennsylvania.

It's the second program in as many days the House elected to end. On Thursday, a bill was passed to end the newly formed Federal Housing Administration's Short Refi program. Next week the House will hear debate on two more bills that would end the Home Affordable Modification Program and the Neighborhood Stabilization Program.

Republicans drove the bills through committee and eventually through the House, calling for an end to excessive government spending. Meanwhile, Democrats asked Republicans to improve the programs instead of terminating them.

Rep. Spencer Bachus (R-Ala.), chairman of the Financial Services Committee, called the EHLP another bailout for the largest banks who hold the debt on these mortgages.

"This Washington spending binge is driving our country right off a cliff," Bachus said. "When the taxpayers pay a $50,000 check, who do you think it goes to? It goes toBank of America. It goes to JPMorgan Chase. It goes toCitigroup. This billion dollars is not going to homeowners. It's going to the largest institutions."

Attached to the bill was an amendment introduced by Rep. Randy Neugebauer (R-Texas) that would require a study for how the program could assist military service members and veterans who have service-related injuries. Still, he favored the bill, calling it a grant program that put tax dollars at risk.

Rep. Barney Frank (D-Mass.) said 84% of the funding will essentially become grants. But he added Democrats are planning a bill that would require all of the funding to come from institutions with more than $50 billion assets and hedge funds with more than $10 billion in assets.

Rep. Chaka Fattah (D-Pa.) said the program has worked well for the state of Pennsylvania for the past 30 years. He pointed out the state appropriated $222 million for its program through the Pennsylvania Housing Finance Agency, and received back nearly $245 million.

The Obama administration said Tuesday night it will veto the bills should they reach the president's desk, but they may not make it that far. Sources in the Senate told HousingWire Thursday the bills would essentially be "dead on arrival."

Write to Jon Prior.

Follow him on Twitter: @JonAPrior

Tuesday, March 8th, 2011, 3:29 pm

Bank of America (BAC: 14.38 +0.84%) recently sampled 100 mortgages reaching 60 days or more delinquent, and found that only 14 of them qualify for a permanent modification through HAMP.

The Home Affordable Modification Program came under fire at the end of February from lawmakers claiming it has caused more harm than good. Even those defending the program say it will not reach as many borrowers as originally thought. The House Financial Services Committee will debate a bill aimed at terminating the program two years before it set to expire.

Through January, participating mortgage servicers permanently modified roughly 600,000 loans, far short of the 3 million to 4 million estimated by the Treasury Department when HAMP launched in March 2009.

BofA monitored the 100 loans as they went through the HAMP waterfall. In the first phase, 28 loans fell out of the program because the bank could not get in touch with the borrower, according to a presentation for investors held Tuesday.

"We conduct extensive outreach activity to these including 110 phone calls and eight customized letters," BofA Executive Vice President Terry Laughlin said, "in addition to door-knocking in hard hit markets and hundreds of outreach events across the country."

Of the 72 borrowers that did provide financials to BofA, 52 did not pass the HAMP underwriting guidelines. Roughly half of those that did not pass already had mortgage payments at or below 31% of their monthly income. Another 23% did not have enough monthly income to qualify, and 17% did not submit their hard ship documentation.

Then, of the 20 that made to a trial stage, 14 completed the trial process by making three consecutive mortgage payments under the new terms.

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, and other HAMP watchdogs have criticized Treasury for not holding servicers accountable for getting more loans moving through the program.

"HAMP’s failure to meet its original expectations has many causes, starting with a rushed launch based on inadequate analysis, an insufficient incentive structure, and without fully developed rules, which has required frequent changes to program guidelines," Barofsky said before a House committee in March.

Laughlin was put in charge of the new mortgage servicing division at BofA responsible for legacy and delinquent mortgages. The department will continue developing loss mitigation programs to help more borrowers avoid foreclosure, but not everyone will be able to keep their home, he said.

"We've reached the crossed roads," Laughlin said. "Despite the loan modification programs, our best efforts, and our industry's best efforts, foreclosure will be unavoidable going forward."

Write to Jon Prior.

Follow him on Twitter: @JonAPrior