For all believing the Treasury's announced expansion of HAMP, the program that is a dismal failure, is really gonna do something, think again.
From the New York Times:
John Taylor, president of the National Community Reinvestment Coalition, said he was skeptical the program would work in large numbers. “I will be pleasantly shocked if investors step up for half a million borrowers,” he said. “The real acceleration in the number of foreclosures prevented will come with mandatory principal write-downs.”
Since the FHA is on the hook if principle write downs occur, it could also put the FHA in more debt, i.e. the taxpayer at risk.
Notice it's never the investors or the banks who are forced to take a hair cut, it's always the homeowners and the taxpayers upon which the losses are dumped.
From the Obama administration fact sheet, the Treasury is going to pay out 21¢ on the dollar for principle reduction less than 115% of the current home value, 15¢ up to 140% and 10¢ above that.
So lenders need to crunch some numbers to see if they can make more taking the government payout or simply foreclose instead.
The GAO estimates 13 million will lose their homes in the next 5 years.
I should note the offshore outsourcing princess, Diana Farrell is making the announcement, so no surprise there in why one would get another ineffective program.
Oh yeah, there is a 3-6 month reprieve after your lost your job. How's that offshore outsourcing of American jobs working out Diana Farrell, now that people can't make their mortgage payments.
Calculated Risk has more analysis and notes after the unemployed reprieve, most will move to HAFA, which is short sales and giving you some dough to get out of your house.