Attempts at Relief and Reform

President's State of the Union Ingores MHA Failure

Posted on Thursday, January 28, 2010

What can you say about our President’s State of the Union address last night? As a real estate professional trying so hard to help so many grappling with the biggest real estate and financial crisis since the Great Depression (and in many ways far bigger than that) its sure is easy to feel left out from last night’s chat. No a single direct mention of our little foreclosure crisis! With 1 in 45 US mortgages in distress, 1 in 7 homeowners behind on their mortgage, and 1 in 4 under water, all I can say is, “wow,” it sure must take balls the country’s top guy to stand up as a lender and avoid the subject altogether.
It’s pretty clear the reason there was no mention is because the MHA program has been such a flop so far. In the majority of other topics that were addressed, the President was at least able to try to blame someone else (most often the former Administration) or site some version of someone’s statistics that seemed to imply some level of success. If the President could not find a way to take credit for even such a miniscule fragment of success with MHA, even he must know what a loser the program has been. Which begs the question, is the claim being made on the presidential website that “A new housing program has stabilized the market, preventing more foreclosures and helping millions more re-finance at historically low mortgage rates.”
Today’s Treasury release of new guidance for converting trial modifications to permanent ones (Supplemental Directive 10-01) came as no surprise. Essentially an attempt to fix the MHA program and shoddy results thus far. With banks processing over a million requests last year, but only 60,000 becoming permanent modification success stories (barring re-defaults which you know will happen), the Administration can no longer blame the banks and the way in which their ideas are being implemented. No, the blame for this failure is the idea itself. You cannot MAKE a home affordable. This new directive which essentially asks banks to get all of the paperwork required for a permanent modification upfront is not going to make a bad idea look better. MHA needs to be re-vamped to include solutions that fit the problem and will actually work.
I’m not sure which is worse, our lender pretending the problem and hardship it is causing so many Americans doesn’t exist in his State of the Union address or the Treasury insistence on fixing a program that needs more than a band aid.


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