The Congressional Oversight Panel assembled a year ago when TARP was enacted in order to review the regulatory system and financial markets offered a sobering analysis last week on the state of the administration’s efforts to stem foreclosures.
In short: Make policy that moves faster than the crisis.
Specifically, the report gives an updated analysis of Making Home Affordable, which comprises the Home Affordable Refinance Program (HARP), aimed at helping homeowners refinance more affordable mortgages, and the larger Home Affordable Modification Program (HAMP), that aims to reduce mortgage payments to keep people in their homes. Those programs, according to the panel’s Elizabeth Warren, have helped “at least temporarily,” and could continue to help in the long term, but, she added, “three major concerns” still haunt the market, as one in eight mortgages is now in default, and foreclosures could rise as high as 12 million in the months to come.
The reports documents concerns about Making Home Affordable’s scope, scale, and asks if it’s solving the problem, or simply dragging it out. Most worrisome, however, is Warren’s assertion that Making Home Affordable is simply anachronistic at this point, addressing a foreclosure crisis as it existed in March 2009, pointing out that HAMP only helps certainly types of borrowers, like subprime borrowers, but not other foreclosures, like those caused by unemployment — one of the biggest drivers of foreclosure.
Warren also expresses concern about the speed of the programs, saying that foreclosures are expected out outpace modifications by about two to one.