Though foreclosures hit a four year low in 2011, one in 69 homes still received at least one foreclosure notice during the year. In some states, the rate was far higher, and the New York Federal Reserve estimates that there will be 3.6 million foreclosures in the next two years.
To much fanfare, the Obama administration unveiled a number of housing aid programs several years ago, claiming that those programs would aid millions of homeowners. However, these programs have not reached as many homeowners as they were supposed to, due to a combination of design flaws and bank intransigence:
The HAMP program, which was designed to lower troubled borrowers’ mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners — a far cry from the promised 4 million.
HARP, which was intended to reach 5 million borrowers, has yielded about the same results. Through October, when it was revamped and expanded, the program had assisted 962,000.
So HAMP and HARP were meant to help 9 million homeowners combined, but have so far only reached 1.8 million. Also, just a small fraction of the money that Congress allocated to HAMP — the Home Affordable Modification Program — has been spent.
So far, the administration has been reluctant to push for principal reductions (reducing the outstanding amount of mortgage loans), even though such reductions could pump billions into the economy. Many of the nation’s attorneys general have also been crafting a settlement with the nation’s biggest banks that could involve some number of homeowners receiving some principal relief, but the numbers that have been floated are not large enough (in terms of dollars or homeowners helped) to substantially alleviate the housing problem. And until a solution to this problem is found, housing will continue to act as an anchor on the economic recovery.