By Kris Hamel
Published Aug 25, 2010 3:57 PM
On Aug. 20 the U.S. Treasury Department issued a report citing the failure of the federal Home Affordable Modification Program to alleviate foreclosures and keep people in their homes. The HAMP was instituted by the Obama administration with the stated purpose of helping 3 million to 4 million homeowners get loan modifications from their lenders that would allow them to keep their homes.
The foreclosure epidemic ravaging cities and states across the U.S. shows no end in sight, with no real relief available to the vast majority of workers, homeowners and renters. More than 2.3 million households have been forced out of their homes due to foreclosure and repossession by the banks and lenders since the economic crisis officially began in December 2007. A million more will likely be added to those ranks this year, with some economic forecasters predicting 1.5 million additional foreclosures in 2011.
But nearly half of the only 1.3 million homeowners who were accepted into the HAMP have not received permanent loan modifications and face or have gone through foreclosure.
According to the Treasury report, about 48 percent of those who had enrolled in the program since March 2009 — some 630,000 homeowners who tried to get their monthly mortgage payments lowered to 31 percent of their gross income — have been cut loose through the end of July. Only 32 percent of those who started the program have been able to get permanent loan modifications to save their homes. (Associated Press, Aug. 20)
In Michigan, one of the states deeply impacted by the racist subprime mortgage catastrophe and the ensuing record rate of foreclosures and evictions, the “Helping Hardest Hit Homeowners” program started on July 12 with the stated goal of keeping unemployed homeowners out of foreclosure.
New foreclosures in the state are skyrocketing as layoffs, plant closings and unemployment soar. The city of Detroit has been particularly devastated.
The program was supposed to utilize $154.5 million in federal funds from the U.S. departments of Treasury and Housing and Urban Development to pay up to half of a home mortgage, up to $750 per month for one year, for laid-off workers who are drawing unemployment benefits. On Aug. 13 it was announced the state would receive an additional $128 million for the program.
Untold thousands in Michigan, like millions of workers around the country, have exhausted their unemployment benefits and/or are no longer “counted” as unemployed because they have given up searching for jobs during this period of economic contraction for workers. So they don’t even qualify for the “Helping Hardest Hit” program, which was supposed to help only 17,000 unemployed homeowners in the state.
But for those unemployed workers who might qualify, the Michigan program has also proven to be a failure. Why? Because most banks and lenders have refused to participate. Not a single one of the major lenders has signed on to the program. Even Gov. Jennifer Granholm was recently forced to admit this.
Exposing gov’t complicity in foreclosures
Instead of using her executive authority, however, to place a moratorium or freeze on foreclosures or mandate the banks to participate in the program, Granholm is urging unemployed homeowners to “call their lenders.” It is a long-established fact that homeowners do not obtain mortgage relief by “calling their lenders.”
The Detroit-based Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs has been in the forefront of exposing the reasons why the federal HAMP and Michigan’s “Helping Hardest Hit” programs have failed.
Coalition leader and anti-foreclosure attorney Jerry Goldberg first exposed the debacle of the federal government’s program in a Workers World article entitled “Millions more to lose homes: Gov’t continues to bail out bankers, not homeowners.” (Dec. 31, 2009)
Goldberg was heard Aug. 16 on WDET public radio slamming the banks and lenders and the federal government for their complicity in tossing people out of their homes. “There’s no stick involved,” said Goldberg. “Instead of saying we’re not going to allow foreclosures unless the banks participate in the programs, [the government] simply depends on the goodwill of the banks — the same banks that make money off foreclosures ... and the same banks that get subsidized with every foreclosure. ... At the root of this crisis is that there’s a bailout going on with virtually every foreclosure.”
Goldberg explained how a majority of mortgages in the U.S. are now owned or backed up to their inflated, pre-foreclosure value by the federal government entities of Freddie Mac, Fannie Mae and HUD.
“Already $145 billion has been paid out by the taxpayers to the banks through Freddie and Fannie to cover losses on bad loans. The total bill is anticipated to reach $389 billion. This means that every foreclosure in essence constitutes a bailout to the banks, which are paid off for the full value of the inflated loan — a loan foisted on homeowners by the predatory and fraudulent practices of these same banks. The lenders are actually being rewarded for not modifying loans.” Goldberg told Workers World.
“The government, instead of helping homeowners keep their homes, carries out most evictions now, and then the home is sold at a minimum price; in Detroit, for example, homes are sold at about 10 percent of a loan’s value, with the taxpayers making up the difference. The federal and state governments have the authority, however, to put a halt or moratorium on foreclosures, to mandate that banks modify loans and allow people to reclaim their homes at real value and based on payments that they can afford.
“It will take a continued struggle to wrest a moratorium — which doesn’t cost a dime — from the politicians who represent banks instead of people.”
The writer is an activist with the Moratorium NOW! Coalition. E-mail: firstname.lastname@example.org.