The Bend Bulletin: Merkley: Housing Aid Must Pick Up The Pace

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Merkley: Housing Aid Must Pick Up The Pace

Source: The Bend Bulletin

By Keith Chu

U.S. Sen. Jeff Merkley, D-Ore., took administration officials to task on Thursday for the snail's pace at which federal aid is reaching homeowners at risk of foreclosure.

While the foreclosure rate in Central Oregon and nationwide remains high, lenders have been slow to modify mortgages for borrowers on the verge of losing their homes. In letters to Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan and in the Senate Housing Committee on Thursday, Merkley urged the Obama administration to speed up the process.

Merkley cited a Government Accountability Office report released Thursday that found the Home Affordable Modification Program hadn't spent any of the $50 billion pledged as part of the bank bailout bill. Although several hundred thousand homeowners have had payments lowered through mortgage modifications, their applications are too early in the process for the federal subsidies to have kicked in.

"I was trying to establish, and I think you're agreeing with me, that, to date, now that we are eight months into the future from the January 15 letter assuring a sweeping program, we've yet to spend a dime that actually helped a homeowner yet," Merkley said, while questioning Herbert Allison Jr., assistant secretary for Financial Stability at the Treasury Department.

In Deschutes County, 307 notices of default were filed in August, compared with 335 in July, an 8.4 percent drop. April was the county's record month for default notices, with 346.

Through August, 2,377 notices of default have been filed in Deschutes County this year, compared with 1,125 through the same period last year, an increase of 111.3 percent.

The modification program pays lenders who agree to reduce monthly mortgage payments for homeowners at risk of defaulting on their loans.

Through the end of August, lenders have offered 571,354 loan modifications to homeowners nationwide and actually began 360,165 trial loan modifications. The modifications are in trial status for 90 days before the modifications become permanent and the government incentives for lenders kick in.

The Housing and Urban Development Department has not released statistics on loan modifications by state or county.

Allison emphasized that even though "very little" money in the program had been spent, homeowners with trial modifications are already paying lower mortgage bills.

"People are receiving relief immediately as they enter the trial modification program," Allison said.

The GAO credited the Treasury Department for improving the modification program, or HAMP, since it was first introduced. But those improvements have yet to translate to a stable housing market, the GAO said.

"Treasury has taken some actions to encourage servicers to increase the number of modifications made, including sending a letter to participating HAMP servicers and meeting with them to discuss challenges to making modifications," the GAO report said. "However, the ultimate result of Treasury's actions to increase the number of HAMP loan modifications and the corresponding impact on stabilizing the housing market remains to be seen."

In his letter to Geithner and Donovan, Merkley suggested several ways to improve the modification program, including:

• Creating an electronic application form for modifications. Currently, Merkley said, homeowners must fax dozens of pages of documents to lenders, who frequently misplace them or fail to share the documents with different divisions of the same company. Electronic forms would make it easier to know that a lender had received a form and solve those problems.

• Increasing transparency. When loan modifications are denied, lenders should explain why and give borrowers a chance to appeal.

• Limiting the impact on credit ratings. Borrowers who are up to date with their modified mortgages shouldn't be reported to credit bureaus because they are paying less than their original mortgage terms, Merkley said.

Neither Donovan nor Geithner had responded to Merkley's letter as of Thursday evening, his office said.

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