previous blog, we talked about the $5.1 billion settlement that Goldman Sachs is responsible
for paying as recompense for its part in the 2008 mortgage scandal. As
part of this settlement, $1.8 billion is to be earmarked to help struggling
homeowners who are still trying to avoid foreclosure of their homes.
It has been seven years since the Recession ended, but how effective have
anti-foreclosure programs actually been? The answer depends largely on
who you ask and where they live.
Out of the $475 billion set aside by Congress for the Troubled Asset Relief
Program (TARP), $46 billion was supposed to go towards helping struggling
homeowners avoid foreclosure. Additional funds were collected in settlements
from Wall Street banks. Between these pools of money and programs administered
through the Department of the Treasury, tens of billions of dollars have
been set aside for aid.
Foreclosures are now down on a national level, and the number of homeowners with “underwater”
mortgages was down to 4.3 million in the third quarter of 2015 (compared
to 5.2 million in 2014).
While assistance programs have greatly benefited a number of Americans,
the Treasury Department’s deputy assistant secretary for financial
stability admits that efforts are not complete, acknowledging that several
areas and states are still struggling. Towns heavily involved in oil and
gas production, for example, are experiencing high rates of foreclosure
after a slew of industry layoffs.
Recession Effects Still Lingering in Some Areas
Critics of the government’s anti-foreclosure strategy are quick to
point out that the very same banks involved in creating the crisis in
the first place are the same banks servicing mortgage modifications using
billions of dollars of incentive payments funded by taxpayers.
Even with the relief programs in place, rates of redefault have been alarming.
For example, in 2009, borrowers who sought relief under HAMP redefaulted
at a rate of 53 percent. Over the lifetime of the program, more than one-third
of participants have defaulted on their modified loans, costing taxpayers
billions of dollars. Mississippi, Louisiana, and Nevada are the three
states with the highest rates of redefault, at 44 percent, 42 percent,
and 40 percent, respectively.
Adding to the problem is the inefficiency of the programs. Complaints about
clerical errors, lost paperwork, and dual-tracking are not uncommon. Furthermore,
many of these mortgage modifications are not affordable in the long term,
increasing a homeowner’s chances of redefault.
More than 10 million Americans live in ZIP codes where between 43 and 76
percent of homeowners are stuck in underwater mortgages. In the top 25
hardest hit American cities, there are 2.5 million vacant homes. Many
are saying that this is proof that federal response has not been aggressive
enough to repair the damage from the 2008 recession.
Homeowners facing foreclosure should seek legal counsel immediately.Contact Sulaiman Law Group, LTD to speak with a Chicago foreclosure attorney: (312) 313-1613.