Obama Plan To Modify Second Mortgages Has Yet To Help One Homeowner

Nearly a year after the Obama administration announced a plan to help up to 1.5 million struggling homeowners modify their second mortgages, not a single homeowner has gotten any assistance.

The program, a part of the administration's $75 billion anti-foreclosure initiative, was supposed to induce mortgage servicers to coordinate payment reductions on additional mortgages when the first mortgage is modified under the administration's Home Affordable Modification Program.

But it's never gotten off the ground.

Housing experts say addressing second mortgages is essential in tackling the foreclosure crisis. For many homeowners, particularly those who owe more than their house is worth, modifying only one of the two mortgages is not enough to prevent foreclosure.

The plan was first announced last April. In August the Treasury Department released guidelines on how the program would work. Months passed before any servicers signed up. More than five weeks ago, Bank of America, the nation's largest servicer with about three million second liens, signed an agreement to join, but a bank spokeswoman said the firm is still awaiting final guidelines from Treasury before proceeding. A Treasury spokeswoman said the firm could technically begin the process now.

On Thursday, Citigroup chief executive Vikram Pandit told the Congressional Oversight Panel why Citi has not signed up yet. "We've said to the Treasury we're willing to work with them as to what this program is," Pandit said in response to a question from panel member Richard H. Neiman, New York's top bank regulator. "We have just seen the details," said Pandit. "I think it's prudent for us to go through that before we sign on."

About three million homes were lost to foreclosure last year, according to RealtyTrac; this year could be worse, in part because so many distressed homeowners have second mortgages. In April, the administration estimated that "up to 50 percent of at-risk mortgages currently have second liens."

In a fact sheet accompanying the administration's April 28, 2009, announcement the administration noted:

Second liens contribute to the number of American homeowners unable to afford their housing payments. Even where a first mortgage payment may be affordable, the addition of a second mortgage payment can increase monthly payments beyond affordable levels. In addition, second mortgages often complicate or prevent modification or refinancing of a first mortgage.

The Second Lien Program will help create a sustainably affordable mortgage payment for millions of homeowners who qualify for a first mortgage modification, yet still face challenges in affording their monthly payments because of a second mortgage.

Compounding the problem is that more than 11 million homeowners owe more on their mortgage than their house is worth, putting them "underwater." For underwater homeowners, reducing the principal owed on the mortgage is more important than interest-rate cuts, because it gives homeowners back their equity in the house and incentivizes them to stick with the mortgage.

Neiman noted to Pandit on Thursday that the second-lien issue "has been a real disincentive that we are hearing from lenders on making particularly principal reductions."

According to Citi's regulatory filings, about 28 percent of its first mortgages are now worth more than the underlying assets, along with about 42 percent of their second mortgages.

WATCH the exchange between Pandit and Neiman below:

Comments

[Stefan Zeiss]

09:56 PM on 03/09/2010

It took Huff PO this long to just find that out! Those fly by night companies that air slick commericials probably did well helping themselves to poor people's money.

[danmartin]

01:13 PM on 03/08/2010

Where is the 75 billion going? Bank administration fee's possibly.

[leoladynh]

12:01 PM on 03/08/2010

Americans who bouth houses they couldn't afford and (some never had the intention to pay for them to begin with) should be left to deal with this problem on their own. They took out mortgages they couldn't afford, they refinanced to the hills to buy crap they didn't need and couldn't afford. Now, the people who were and still are financially responsible throughout all of this are mopping up the messes. There is a reason banks have always had minimum lending standards for credit... hell why not do away with credit all together and loan everyone more money than they could ever repay in a lifetime. Americans are so used to handouts - welfare, social security now mortgage reform which reduce monthly payments by HALF!!! I know a woman who is on the mortgage reform her payment went from $3500 to $1750, her husband has had stomach stapling, a penile implant, they have a weekly housekeeper come in and he's on disabiity for what else... DEPRESSION. They haven't changed their spending habits one bit - they just have $1750 more each month to go out and buy more. It must be nice.

[Stefan Zeiss]

09:59 PM on 03/09/2010

You can thank Clinton for strong arming the banks for strong arming banks back in 1999 to force them to qualify people that should not have been creditworthy for a mortgage. Bush tried to stop this madness, but Comrade Barney Frank and company would not budge.

[Rule Of Law]

05:29 PM on 03/11/2010

Bee ess. Bush went on tv and implored Americans to buy more house back in 2004. Google it--it's right there.

Then he had Greenspan tell the mortgage lender to become, quote--"More Creative"--in their lending practices while having the FED keep interest at record low rates to flush the system with cheap money.

Bush needed this derivative bubble to hide the fact that his tax cuts and two off the books wars being funded with borrowed money from China were wrecking the economy.

[Rule Of Law]

05:37 PM on 03/11/2010

Just from the textbook neo way you phrased your post, I checked your bio here.

Born just yesterday, it appears. Just in time to shill for a lost cause.

You need to either get a day job, or expand your reading and newswatching beyond Fox, because every economist and pundit worth listening to has already said that this crash was caused by WALL STREET, it came from the very Top.

Blaming the people is just the same old same old that you cons like to do to cover the socialist bailout of your money masters.

Oh, the poor silly bankers--they were forced to lend to people without proper paperwork, or proof of ability to pay. The poor mislead dears. LOLOL!

When has a banker every been forced to do anything by anyone that he didn't want to do? Bush and Greenspan laid the policy for this rip off and the banks converted all those easy loans into derivatives that made them fat and happy.

NOW it is WE who pay off their bad choices. Is that the America you want to live in?

[boston998]

11:13 AM on 03/08/2010

Obama's new slogan:
If you can't afford your house, don't worry, your neighbor will help pay for it.

[Stefan Zeiss]

10:01 PM on 03/09/2010

Don't forget the Internationale tune playing in the background as he pontificates.

[SwingingFromCenter]

02:34 AM on 03/08/2010

Good. The only thing worse than helping out someone who made a bad decision and got a mortgage they couldn't afford is bailing out someone who took out TWO.

I mean seriously. They got the house they couldn't afford (probably got some money back in the deal as well), spent that money, and then took out ANOTHER mortgage on top of the old one....and we're supposed to feel bad for them?

[Hardyman1966]

01:00 AM on 03/08/2010

Let the Obama screaming begin. Fine. It would be the EXACT same problem if McCain was in office. Loan modifications are difficult enough to get through on a good day for the 1st lien. Before the Home Affordable Modification Program took effect, it was generally assumed that, if the 1st was approved and there was a 2nd, the 2nd lien holder was out of luck and basically had to settle for about 10% of the balance. Period. It's why I gave up trying to work on modifications for people a year ago. It's nothing but a runaround.

If they weren't motivated to take a complete loss then, why would it be any different now? Would you do it?

MAYBE people shouldn't have maxed-out their equity to begin with. Maybe people shouldn't have lied through their teeth on stated income loan applications. MAYBE people shouldn't have bought property with no money down by taking out an 80% 1st with a concurrent 20% 2nd.

It's been 13 months with the current President and I dare anyone to cough up someone who would have accomplished anything more significant in the same time frame, particularly with the polarized climate we're enduring. Enough with the high school mentality already.

It's not a Democratic or Republican problem. It's an American problem.

[AllAboutNothing]

02:51 PM on 03/08/2010

Thank you Hardyman; The whjole real-estate thing happened because Real-estate Brokers were greedy. I was a Realtor years ago and saw how they jacked around with prices of properties. I didn't like it so I got out. It's a real vicious market, and is not geared to the consumers best interest. Then the Banks did their fair share. The RE Brokers were screaming about huge inventories(new/old) and the Banks decided to do some creative marketing which landed us on the tiny square we're on today.

The primary reason the modification plan is not working is the Banks/Mortgage CO's don't want to take the losses created by them.The first time I got layed-off in 2003 I applied for a loan mod on a $50K balance not approved. The second time 4 yrs later, I applied again I still haven't heard anything. Several phone calls and letters later nothing. This all happened in the midst of the housing crash, which although I was on UMPB I was still making my payments. If the banks don't want to do it then it's not going to work.

[Rule Of Law]

05:50 PM on 03/11/2010

The entire dirty system, right from your local real estate sales person up to the Big Wall Street Banks makes more money off throwing people out of their homes and then churning the properties for new fees and commissions and derivatives to sell to more ignorant 401-k fund managers!

The whole thing stinks, and it starts on Wall Street!

[MichaelLittleBig]

09:14 PM on 03/07/2010

The government programs don't work because they are unacceptable to the banking industry.
Simply put the Banks have all the rights and the consumers have none.

Government programs such as refinance at 125% your home which you owe more than its worth would be foolish financially.

There are other viable options available to the consumer. But politically will never be legislated because the banks will never permit the Congress to pass those laws .

Elizabeth Warren head of the Congressional Oversight Panel in 2009
proposed what is now known as the Consumer Financial Protection Agency.
It gives the mortgage borrowers rights and defenses which the banks so far have successfully fought.

The present federal bank regulators have been negligent and malfeasant in their so called consumer compliance responsibilities in performing their duties while the Congress has looked the other way. Realistically the answer to foreclosure actually is very straight forward- include and make mandatory that the mortgage borrower become an equal participant in the solution of a problem through mandatory federal arbitration with federally chartered banks who legally own and hold their mortgage with in the same regulatory system that the banks lend its mortgage money.
The federal arbitrator could be within the federal bankruptcy court system and have the authority to address and settle the issues with the borrower and the lender.

There are a projected 3 million foreclosures for 2010.

Make your vote count in 2010. Change Congress-no incumbents.

Michael LittleBig
Cleveland Ohio
3-7-2010

[feyangel]

08:23 PM on 03/07/2010

Blame the Banks. Trust me, NO PLAN will work if they don't cooperate with it. And, as a mortgage & real estate broker, I can tell you they make NO EFFORT to help people. NONE. No matter what avenue anyone takes the Banks end the quest for relief at foreclosure.

[Alpha11]

06:11 PM on 03/07/2010

If we can't save the real estate in this country, we won't have any wealth.

[SwingingFromCenter]

02:36 AM on 03/08/2010

The real estate won't go anywhere. The only thing that will change is who holds the deed to it. I'd rather have people who were responsible and didn't buy more house than they could afford own it than people who can't make a good decision.

[Rule Of Law]

05:51 PM on 03/11/2010

lol...

[tompoe]

04:57 PM on 03/07/2010

One more reason to start prosecuting every one of the Wall Street Banksters.

[Rule Of Law]

05:51 PM on 03/11/2010

Seconded, strongly! And faved.

[sc300nc]

02:43 PM on 03/07/2010

Why is this not surprising?

[Fremon]

01:41 PM on 03/07/2010

President Obama, I supported you financially and worked to get you elected. You have to get control of your administration to act along the lines of your soaring rhetoric and magnificent speeches. Get on it! You are making to many speeches and your messages are diffused. The American people cannot hold two thoughts in our heads at the same time, or to put it differently "we can't walk and chew gum" at the same time. Get on it and make one or two achievements to which you can point. The bailouts are not enough as they were started under Bush. Your economic team screwed up by not extracting real reforms or put a stopper on the bonuses that were awarded to bankers investing that cash in bonds and speculations to which millions were awarded to these individuals. I did the same with my monies and made money and any monkey could have done the same. GET ON IT! The Retards won't give you any assistance and you should have known better than to deal with one or two Retards to supposedly advance your agenda. You won't get anywhere with them. LEARN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Winston120]

03:53 PM on 03/07/2010

Obama is far too arrogant to change course he set with his Chicago Mafia.

These are the same people that ride past the worst projects in the USA on their way to O'Hare Airport.

I have lived and worked in Chicago. This gang is not that dissimilar from the one in Eddie Murphy's group in his movie "The Distingished Gentleman", probably the most honest and funny movie about how DC works.

[TJCole]

12:31 PM on 03/07/2010

Now we're gonna concentrate on immigrants while millions of Americans are losing their homes....

[Rule Of Law]

05:53 PM on 03/11/2010

Yep. And losing our jobs, our ability to educate our children, our retirements, and any chance at fair health care. And I read just minutes ago in my local paper that "minority" babies will outnumber the present majority by next year. We should have let the Indians win.

[jadoca]

10:05 AM on 03/07/2010

Indian Chief 'Two Eagles' was asked by a white U.S. government official,
'You have observed the white man for 90 years.
You've seen his wars and his technological advances.
You've seen his progress, and the damage he's done.'

The Chief nodded in agreement.

The official continued, 'Considering all these events, in your opinion, where did the white man go wrong?'

The Chief stared at the government official for over a minute and then calmly replied,

'When white man find land, Indians running it, no taxes, no debt, plenty buffalo, plenty beaver, clean water.
Women did all the work, Medicine man free.
Indian man spend all day hunting and fishing; all night having sex.'

Then the chief leaned back and smiled,
'Only white man dumb enough to think he could improve system like that.

[RJII]

09:47 AM on 03/07/2010

Help on second mortgages??? Most people aren't getting help on the first one.

I just found stable work after 2 years of unemployment and losing everything hard earned over 15 years. However, my bank says I now make too much to modify and save my home. Too bad the gov't didn't hold the same standard before bailing out failed wealthy bankers.