Some of the federal funding announced today by the White House will go toward second mortgages. One group quickly proposed allocating a portion of the funds for supplementing federal loan modifications but called on the government to rein in mortgage servicers and investors.
The Barack Obama administration said today that $1.5 billion will be used to fund “innovate measures” in hard-hit housing markets. The funding will support state housing finance agencies and similar organizations.
The program will be available for states that have seen at least a 20 percent decline in home prices since the peak. Also factoring into eligibility is unemployment.
The five impacted states are Arizona, California, Florida, Michigan and Nevada, according to the Consumer Mortgage Audit Center.
Impacted borrowers include those who have become unemployed, have negative equity or need help addressing “challenges arising from second mortgages.”
The U.S. Department of the Treasury is designing the programs to must meet funding requirements under H.R.1424, the Emergency Economic Stabilization Act of 2008. The law, which was enacted in October 2008, created the $700 billion Troubled Asset Relief Program that was used to flood the banking system with capital and has more recently seen substantial repayment and dividends from institutions seeking to rid themselves of increase government scrutiny.
The Center for American Progress suggested some of the funds could be used to augment the Home Affordable Modification Program. But the group, which says it is a nonpartisan research and educational institute, called for the administration to pressure mortgage servicers.
“We hope that the administration still recognizes that without a stick over the head of servicers and their mortgage investors, little will happen,” the center said in a statement. “We do not see in the program as proposed the hard-edged elements that will in fact move loan servicers who in most cases are not the actual lenders who have funds at risk into making changes that keep Americans in their homes.
“The administration and Congress must get tougher with the network of bankers, lenders, servicers and investors whose actions show that they continue to find a foreclosure, or holding a property in limbo, economically more in their interests than doing something more to keep Americans in their homes.”
