Create a foreclosure prevention fund for homeowners

Foreclosure fund has lackluster results so far

Updated: Wednesday, January 13th, 2010 | By Angie Drobnic Holan

Back in February, we rated Obama's promise to create a $10 billion fund to help homeowners as a Promise Kept. In fact, we noted, Obama actually exceeded his promise, sending $75 billion to the fund because the crisis had worsened since the campaign of 2008.

The program, called the Home Affordable Modification Program, or HAMP, has been operating for almost a year now. The idea was that lenders would refinance loans for troubled homeowners, and the federal government would make a small payment to the lender as an incentive.

But the problem is that it's not working as hoped. Out of 759,058 mortgages modified on a trial basis through November, only 31,382 homeowners have received permanent modifications. For perspective, Moody's Economy.com estimated that 2 million homes were lost to foreclosures and short sales in 2009, and another 2.4 million will face foreclosure in 2010.

Criticism of the program has been widespread. "HAMP has made only limited progress for nine months now, and the residential foreclosure crisis continues to mount," said Richard Neiman, a member of the congressional oversight panel that monitors the program, in a story by McClatchy Newspapers.

''For some folks, it is doing more harm than good, because ultimately, at the end of the day, they are going back into the foreclosure morass," said Mark Zandi, chief economist at Moody's Economy.com, to the New York Times.

The Obama administration continues to support the program, saying that the modification program is helping some homeowners

For our purposes here at PolitiFact, it's hard to let our Promise Kept rating stand when the fund has fallen short of its intended promise. We're going to roll back this promise to a Compromise, and keep monitoring the situation to see if how the mortgage modification fund ultimately concludes.

Sources:New York Times, U.S. Loan Effort Is Seen as Adding to Housing Woes, Jan. 1, 2010

McClatchy Newspapers, Homeowners often rejected under Obama's home plan, Dec. 17, 2009

FinancialStability.gov, Obama administration releases new data on modification program, Dec. 10, 2009

Obama unveils plan to aid homeowners

Updated: Thursday, February 19th, 2009 | By Angie Drobnic Holan

What a difference a year makes. In 2008, presidential candidate Barack Obama talked about a plan to help homeowners with subprime mortgages refinance loans or sell their homes. About $10 billion should suffice, he said at the time.

The months went by, the economy worsened, and Obama won the election. On Feb. 18, 2009, President Obama unveiled his plan. Price tag: $75 billion.

By providing incentives to both lenders and borrowers, the plan allows some homeowners to refinance loans. It excludes investors, speculators, people who fraudulently obtained loans, and people who purchased homes so beyond their means that even refinancing won't help them.

"The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly," Obama said. "It will give millions of families resigned to financial ruin a chance to rebuild. It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone."

The plan may end up more expensive than $75 billion because it also provides a guarantee of up to $200 billion in capital for federal mortgage holders Fannie Mae and Freddie Mac. That guarantee may or may not be necessary, said Treasury Secretary Timothy Geithner.

A few parts of Obama's overall plan require approval from Congress, but most of the money comes from the Troubled Assets Relief Program, or TARP, that Congress approved in 2008, Geithner said.

By putting $75 billion toward the program, Obama exceeded the terms of his campaign promise. Promise Kept.

Sources:The White House Web site, President Obama's Housing Plan , Feb. 18, 2009

The White House Web site, Press Briefing with Treasury Secretary Geithner, HUD Secretary Donovan, and FDIC Chairman Bair , Feb. 18, 2009

The Boston Globe, President steers $275b to housing , Feb. 19, 2009

The Boston Globe, Questions, answers about the program , Feb. 19, 2009

Bloomberg.com, Obama housing plan questions and answers , Feb. 18, 2009