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Charles Payne On TARP SIG’s Report: Home Mortgage Modifications

Neil Cavuto interviews Charles Payne on Obama’s $30 billion small bank bailout which he believe will do little as the banks that receive the money will just sit on it like the Big Boys did.

What’s more important about this interview is the Neil Barofsky report that has another interesting tidbit inside.

This is going to be another one of these programs that sounds great on the surface but doesn’t work, like this home mortgage program.  This thing is a disaster.  I don’t know if you if saw this Neil Barofsky report, but he’s saying $75 Billion to help 4 million, (Neil: This is the TARP guy), he’s the TARP inspector general.  This guy has been the straightest guy out of everybody out there, maybe that’s why we don’t hear about him too much.  $75 Billion dollars set aside to help 4 million homes.  He’s saying that it’s only helped 66,000 so far?

For those that would like to peruse the 224 page quarterly report to Congress issued 1/30/2010, go here.

From Page 96:

Homeowner Support Program

Making Home Affordable Program

The Making Home Affordable (“MHA”) program was introduced by the Administration on February 18, 2009, as a collection of three major initiatives: a loan modification program, a loan refinancing program, and additional support for reduced mortgage interest rates.  According to Treasury, the program was designed
to offer assistance to millions of homeowners making a good-faith effort to pay their mortgages and to protect families and communities from the destructive impact of the housing crisis.  Subsequently, Treasury has created a foreclosure alternative program as a part of MHA. TARP funds are primarily dedicated to one initiative within MHA, the Home Affordable Modification Program (“HAMP”).  According to Treasury, HAMP is a
$75 billion program that will lower monthly mortgage payments for homeowners by providing loan modification incentive payments to the servicers and loan holders (lenders or investors — referred to as investors in this section) and by protecting against further loss of collateral value.  In addition, the MHA program now includes foreclosure alternatives for those not able to complete a HAMP modification. Of the $75 billion reserved for HAMP, $50 billion will be funded through TARP and will be used to modify private-label mortgages.

Of the $50 billion in TARP funding, $10 billion has been allocated to encourage HAMP modification by protecting investors from potential home-price declines in their mortgage portfolio assets in regions where forestalling foreclosure may lead to significant losses. According to Treasury, the purpose of the Home Price Decline Protection (“HPDP”) program is to “encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed.”  In addition, Treasury estimates that another $4.6 billion of the TARP $50 billion allocation will be used for the Home Affordable Foreclosure Alternatives (“HAFA”) program, previously referred to as the Short-Sales/Deeds-In-Lieu of Foreclosure (“SS/DIL”) program, designed to provide alternatives to foreclosure.  Beyond the TARP support, the additional $25 billion in HAMP funding is provided under the Housing and Economic Recovery Act of 2008 (“HERA”) and will be used to modify mortgages that are owned or guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), two of the Government-sponsored enterprises (“GSEs”).

Status of Funds As of December 31, 2009, Treasury had signed agreements with 102 loan servicers
allocating up to $35.5 billion under HAMP. Of that $35.5 billion, as of December 31, 2009, $15.4 million had been spent on incentives for 11,574 of the 66,465 permanent modifications.  The remaining permanent modifications will receive incentive payments in the next quarter. Of that $15.4 million, approximately $12.1 million represents incentive payments to servicers and $3.2 million represents payments to investors.  Borrower incentive payments begin only after one year of participation in the program.
To date, the largest allocation of incentive payments went to Countrywide Home Loans Servicing LP, now owned by Bank of America, which is eligible to receive up to $6.8 billion in TARP funds. The average allocation to each servicer through HAMP is $348.5 million.  The amount of funding allocated to a servicer does not represent the amount of incentives paid to the servicer; rather, the allocation is the maximum amount, or cap, of potential incentive payments that Treasury has approved for each servicer. Table 2.25 provides details regarding the five largest allocations made under HAMP as of December 31, 2009.

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