IndyMac To Be Sold, Mortgage Modifications To Continue

by Peter G. Miller
January 5th, 2009

If you think that Washington is a monolithic entity where every department and agency marches in lock-step, just take a look at how foreclosures are being handled.

First up, we have HUD and the FHASecure program. Announced as a foreclosure prevention program that would save huge numbers of homeowners nationwide, the program came to a halt December 31st. While the final numbers are not in it looks at though roughly 4,100 delinquent conventional borrowers nationwide will have received new FHA loans under the program since August 2007 when it was first announced by President Bush.

Next we have the much-discussed Help For Homeowners effort that passed the Congress during the summer after much debate about the possibility of spending perhaps $4 billion to save as many as 400,000 homeowners. No worries about that $4 billion now — HUD says that as of December 15th it has taken in 326 applications to date and approved NONE. Not one.

In contrast we now have the proposed sale of IndyMac by the Federal Deposit Insurance Corporation. The FDIC set up a model loan modification program and here’s how the numbers look:

___ Mortgages Eligible for Modification — 46,500

___Total Modification Offers Mailed to date — 32,274

___Total Completed Modifications (Verified Income) to date — 8,512

___Total Additional Verbal Acceptances of Offers to date — 9,480

The need for FHA help is overwhelming. In comparison to the puny numbers cranked out by HUD since August 2007, more than 8,000 people a day are receiving foreclosure notices, according to RealtyTrac.com. Just in November, 259,085 notices went out.

What’s amazing about the IndyMac sale is that the new owner, a group of private hedge funds and other capital sources, has agreed to continue the modification plan.

You have to wonder why more lenders, and more federal agencies, do not follow the pattern set-up by IndyMac. Surely a modification is better for both borrowers and loan owners than a foreclosure.

Traditionally, the FHA has been a major source of consumer financing. It was started specifically to provide an alternative to private lending in the 1930s and it did just that by popularizing the long-term mortgage. Now is a new opportunity to step up, but the results of the past year-and-a-half have been dismal. Meanwhile, people are losing their homes, growing inventories of foreclosed homes are holding down local home values and HUD keeps grinding out news releases applauding its non-efforts and lack of productivity.

Hopefully one the first tasks of the new Congress will be to investigate how HUD has handled the foreclosure mess during the past two years. The results should be enlightening.

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