What Are Banks Really Doing With All That Bail Out Money?
(PRWEB) July 11, 2013 -- Home Affordable Modification Program (HAMP) and the streamlined modification initiative will now be extended through year-end 2015. FHFA’s directives make the extension applicable to loans owned or guaranteed by Fannie Mae and Freddie Mac. Additionally, the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development announced that they are extending HAMP for non- Fannie Mae and Freddie Mac loans. (Source: FHFA, http://goo.gl/ZHv7p, May 30, 2013)
“One of FHFA’s priorities is to provide assistance to struggling borrowers who are at risk of losing their homes,” said FHFA Acting Director Edward J. DeMarco. “These extensions keep two valuable foreclosure prevention programs available to those who need them. The extensions also align the end date for three key assistance programs that were developed in response to the housing crisis.”
The U.S. Treasury has invested about $200 billion dollars in bailout money to hundreds of banks in 2008/2009. So far, less than half of that money has been paid back, according to CNN Money. (Source: http://goo.gl/yOTxA) This means that the banks still have over $100 billion in bailout money left and plenty of homeowners can still get the help they desperately need. Unfortunately, the application process remains far from streamlined. Typically, the homeowner is required to supply detailed financial and other information to their lender/servicer to see if they qualify for HAMP or other proprietary programs the lender offers.
Each lender has different programs and qualifying requirements. It is essential for homeowners to conduct thorough research on all of the program guidelines before applying for assistance. If you do not correctly portray your situation to your lender, you may hurt your chances of getting a loan modification both now and in the future.
Some of the most successful loan modifications and principal loan reductions have been for individuals who choose to retain a lawyer to help with the complex process. A Real Estate Law Firm such as the Aldrige Law Group (http://www.AldrigeLawGroup.com) will not only help clients gather necessary documents but also insure that only the statements and files that will aid in obtaining the desired result are submitted. Some documents and statements may actually hurt your chances in getting a mortgage rate reduction and it is best to consult a legal professional about whether to include certain documents or leave them out. A well qualified attorney who specializes in Real Estate Law and Homeowner’s Rights will be able to adeptly argue their client’s case, qualify them for the best programs and often times not only get the interest rate reduced to as low as 2% but also get negative equity forgiven off the principal amount of the loan. Even though retaining a lawyer does cost a fee, the homeowner ends up saving much more money in the long run (not to mention stress) and the reduced interest rate will remain for the lifetime of the loan.
Katherine K. from Topeka, KS retained the Aldrige Law Group to help with her mortgage. “After I'd attempted to do this on my own for a year and gotten nowhere, in a WEEK after putting my faith in Matthew and the Aldrige group, my mortgage was being reviewed for modification! I had been facing foreclosure and having my home sold – and it was cancelled in a WEEK! Three weeks later, I got my modification from an adjustable to a fixed and from over 10% to a little over 3%,” she said.
Another client of the Aldrige Law Group had a similar story. Fatongia P. from Reno, NV said, "I tried to modify my loan by myself and I had little luck and I only got my mortgage to drop from $1600 to about $1200. [The Aldrige Group] got my monthly payments to drop from over $1200 to $485 a month…. Now, we can afford to raise our family and keep our HOME.”
Homeowners that cannot afford a lawyer or chose not to take that route can get help with the application process through government counselors. Although these free counselor services are an excellent resource, unfortunately they often aren’t able to get their clients the same results as private attorneys. The federal government has made around $400 million available for foreclosure counselors but because of the high volume of families that require assistance, the agencies are overwhelmed with case loads and simply do not have the time to help everyone. Homeowners looking for free counseling services can contact the Office of Housing and Urban Development, which offers a list of HUD-approved counseling agencies, or NeighborWorks America.
All of these programs are the result of the $700 billion bailout bill passed by the Senate on October 3, 2008 under President George W. Bush. The bill established the Troubled Assets Recovery Program (TARP), which allowed the Treasury to lend $115 billion to banks by purchasing preferred stock. (Source: WSJ, Historic Bailout Passes as Economy Slips Further, October 4, 2008) Additionally, Congress included help for homeowners facing foreclosure by requiring the Treasury to both guarantee their loans and assist them in adjusting mortgage terms through HOPE NOW. The HOPE NOW program is a cooperative effort between the government and lenders to help homeowners who may not be able to make higher mortgage payments after their interest rate resets.
Because, Congress only authorized $350 billion to be lent out in 2008, the other $350 billion was saved for the new President when he took office in 2009. Obama used the TARP funds to launch the $787 billion Economic Stimulus package and launched the Making Home Affordable Program (MHA). By 2012, banks had repaid $292 billion of TARP funds, leaving $120 billion still outstanding. These funds were used for the HARP program (part of Obama’s MHA) to help homeowners facing foreclosure. TARP spent $35 billion in fiscal year 2012 for programs to help homeowners modify mortgages and avoid foreclosure. This was part of the Homeowner Affordable Modification Program, or HAMP. In fiscal year 2013, TARP budgeted $12 billion for HAMP.
Although HAMP has been widely criticized for only reaching a small segment of the troubled housing market in it’s first few years, the guidelines for HAMP have changed significantly in June 2012. The new program guidelines offer three times the incentives previously available to investors for principal reductions. Since that time, principal reductions have increased dramatically in both frequency and size, according to statistics published by the U.S. Treasury.
The recently announced time extension for HAMP and expanded guidelines make assistance for those facing financial hardship and struggling with their mortgage more attainable than ever. The ultimate goal of these programs is to prevent further foreclosures and stimulate the economy.
Eric Cook, Aldrige Law Group, http://aldrigelawgroup.com, +1 407 259 3325, [email protected]
Share this article