Many Struggling Homeowners

The Congressional Oversight Panel says in a report released Wednesday that the administration projects only one million families will end up with lower monthly payments as a result of the program. The report says six million families are more than two months behind with their payments, and 200,000 more families receive foreclosure notices each month.

A year and a half after launching the program, “Treasury is still fighting to get its foreclosure programs off the ground,” Elizabeth Warren, who heads the independent panel set up by Congress, told reporters Tuesday.

“Re-default signals the single worst form of failure” by the Treasury Department, said Warren, who is a professor at Harvard Law School. “Billions of taxpayer dollars will be spent and families will nonetheless lose their homes.”

“We strongly agree with the (panel’s) assessment that foreclosures are at an unacceptable high rate, which is why this program has been designed to prevent avoidable foreclosures,” Treasury spokeswoman Meg Reilly said in a statement. She said the program was not designed to prevent every foreclosure, and “we cannot help those who simply bought a home they could not afford.”

The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That’s because consumers who are paying their mortgages on time are likely to see such reductions as unfair, they said.

Such programs “could raise issues of fairness,” said Sanjiv Das, Citigroup’s top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.

David Lowman, chief executive of Chase’s mortgage business, told lawmakers that large-scale mortgage principal reduction “could be harmful to consumers, investors and future mortgage market conditions.”

Republicans, however, say the Obama administration should abandon the effort and focus on creating jobs.

“The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery,” said Rep. Spencer Bachus of Alabama, the committee’s senior Republican

The Home Affordable Modification Program, Treasury’s TARP-funded mortgage modification program, was originally intended to keep 3 million to 4 million homeowners in their homes by modifying mortgages to sustainable levels, Barofsky noted. “But it appears that it may never come close to meeting that goal,” he said. There have been fewer than 230,000 permanent modifications more than a year into the program.

Failings of the program include problems with transparency, Treasury’s execution of the program and problems with the program’s design, Barofsky said. In many cases, borrowers who receive modifications are still unable or unwilling to continue to make payments because they’re too high or their homes are “hopelessly under water,” meaning the properties are worth far less than what is owed, he told the committee.