Aid to the Unemployed Facing Foreclosure: Too Little, Too Late?

By
Thursday, June 24, 2010 at 6:00 am

Rep. Barney Frank (D-Mass.) and President Obama have proposals to help unemployed homeowners facing foreclosure. (Zuma Press)

Sandra Monroe-Olcott of the Montclare neighborhood of Chicago is in the same position as hundreds of thousands of Americans. She lost her job on April 1, 2008. She applied for unemployment insurance — $804 every two weeks — and immediately started searching for another position. Her husband, now 74, had stopped working and receives Social Security. Her household also includes her elderly father and her son, until recently unemployed and now earning $4.30 an hour as a part-time waiter. The government benefits would tide the family over until she found a new position, she thought. But she never found one.

[Economy1] At the end of March, she received her last unemployment insurance check, becoming one of the million 99ers who have exhausted federal and state benefits. The family went into survival mode. They sold their car, their truck and all of their jewelry except for their wedding bands. They cashed in their insurance policies and 401k. Still, the bills kept coming.

“When that lifeline was cut, so was the mortgage payment,” Monroe-Olcott said. “Last month I used my credit card to take a cash advance to pay my mortgage, knowing that the interest rate on a cash advance is very high, and not knowing how I am going to pay it when the bill arrives. But I was desperate and scared, since I already received an ‘Intent to Foreclose’ letter. I have sold everything I possibly could to make it this far.

“There is nothing else left worth anything. I even rented out the garage, but that person also became unemployed and couldn’t afford the rent. The bank asked me if I would consider selling the home. There are five properties for sale on my block and [they] have been for sale for two years. If I could manage to sell my home” — she laughed — “it would sell for what I owe the bank. Then where would I live? [I would have] no income to pay the rent, even if the landlord overlooked my bad credit check.”

Monroe-Olcott’s predicament is governed by the fundamental equation of the economic crisis: Unemployment drives foreclosure, and the two are jointly destroying middle-class wealth as the effects of the recession linger on. The Obama administration’s efforts to help such homeowners thus far have faltered, failing to put a dent in the wave of home losses. Two new programs are specifically designed to help unemployed people undergoing foreclosure, like Monroe-Olcott. But for many, it might be too little, too late.

This week, the Home Affordable Modification Program — the administration’s flagship effort to help homeowners by letting them refinance for lower monthly mortgage payments and thereby avoid foreclosure — reported dismal numbers. In recent months, the program has kicked out far more homeowners than it has helped. It has completed only 346,000 modifications — though it initially set its sights on three million.

As Mike Konczal of the Roosevelt Institute argues, loan modification generally increases the loan balance by capitalizing the fees to alter the mortgage, leaving homeowners even deeper underwater. An analysis by state regulators shows that 70 percent of mortgage modifications bump up the size of the loan. Just 120 HAMP modifications since March have included principal reduction, according to a report by the Office of the Comptroller of the Currency and Office of Thrift Supervision released on Wednesday. Testifying before the Senate Finance Committee, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, said the HAMP program “risks being remembered not for catalyzing a recovery from our current housing crisis, but rather for bold announcements, modest goals and meager results.”

Worse, the Obama administration’s foreclosure proposals have done little to aid the more than a million Americans who are both unemployed and undergoing foreclosure proceedings, since reducing monthly mortgage payments does little for borrowers who have no income. The vast majority of homeowners in foreclosure have suffered some sort of “income shock,” most often due to unemployment or underemployment. HAMP reports that 58 percent of its applicants cite unemployment as the primary reason for foreclosure. And a recent study by economists at the Federal Reserve shows that four in five subprime mortgage holders who default do so due to income loss.

But this week, the Obama administration is moving on two little-noticed provisions that finally address the crisis of unemployed homeowners facing foreclosure and possibly enact more effective measures than mortgage modification. On Wednesday, President Obama gave final approval for the $1.5 billion Hardest Hit Fund, proposed this winter to help homeowners in the states most impacted by the unemployment and housing crises. The states — at first just California, Nevada, Arizona, Michigan and Florida — have already come up with “innovative” proposals to keep homeowners in homes using federal funds. Now, the federal government will give them hundreds of millions to enact them. The measures include cramdown, or principal reduction, cited as the most effective method to staunch foreclosure; and pools of money to help foreclosed families pay arrears. And some states will give unemployed homeowners like Monroe-Olcott low-interest loans to help make mortgage payments.

A similar measure is also in the financial regulatory reform bill, currently being completed in conference committee and expected to be finished by July 4. Rep. Barney Frank (D-Mass.) has requested that the final bill include a House provision providing low-interest loans to the unemployed facing foreclosure. The provision is modeled after Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program, or HEMAP, which has successfully helped 43,000 unemployed mortgage-holders. The $3 billion national program would offer unemployed homeowners low-interest loans for up to $50,000, funded from the Troubled Asset Relief Program, to help them pay their mortgages for up to two years until they find jobs. Homeowners would make low payments to the Department of Housing and Urban Development during the spell of joblessness, and then repay the government after finding work.

The fate of the proposal remained uncertain as of the time of this article’s writing. Frank said that rather than taking the funds out of TARP, he might assess very big banks and hedge funds. “I think it would be a good thing for some of those very highly paid employees to contribute some money to help people losing their homes because in many cases it was their misjudgments that led to that happening,” Frank told reporters on Wednesday.

Housing experts say that the provisions should help those hardest hit by the employment and housing crises, but worry that the damage might be done. Already, banks have foreclosed on millions of homes, and 5.5 million more are in the foreclosure pipeline. Barry Zigas, the director of housing policy for the Consumer Federation of America, lauded the efforts but noted that they have the hallmark of most of the administration’s policies towards the unemployed facing housing loss: They do not address the root cause of being underwater or unemployed.

“The new [Wall Street reform bill’s] initiative plus the 10 states that the administration has provided money to for pilot programs to help the unemployed facing foreclosure will be helpful. But ultimately, it is job creation — genuine job creation — and the extension of unemployment benefits that will help the situation,” he said. “If we loan [unemployed persons facing foreclosure] money and then don’t do anything to help them get jobs, it is nothing but a temporary palliative.”

Unemployment is not expected to decline anytime soon, meaning that even if the government gives homeowners facing foreclosure two-year loans, some percentage will still be members of the long-term unemployed, often underwater on their mortgages, in 2012 or later. And the Obama administration thus far has not thrown its weight behind two provisions that might make actual dents in the housing crisis writ large: cramdown and right-to-rent, which would give homeowners the right to rent their home after defaulting on their mortgage.

In the meantime, those out of luck continue to wait. Out of options, Monroe-Olcott decided to apply for a loan modification from her bank. (Her mortgage has been sold between banks five times.) “If we are foreclosed on, I could put my father and husband in a nursing home, and me and my son will walk the streets. There is no welfare if you own a home, and you can’t get welfare if you do not have a permanent address!” She expects to hear back from Chase in 60 to 90 days.

Follow Annie Lowrey on Twitter


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106 Comments

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Sunken ship!
Comment posted June 24, 2010 @ 3:03 pm

WAY WAY too late. This administration is not able to help people who lost income and then homes. All these programs are a federal waste of money and only help the banks and those who profit from other's misery. The boomers are on the way down, and believe me, I believe it was all part of a plan to take the middle class to hell and back and they succeeded. It's way too late and the damage is done, and now countless homes sit empty, people are homeless, out of unemployment funding, and living in desperate situations. This article should have gone to press 2 years ago!


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Comment posted June 24, 2010 @ 4:32 pm

Congress has failed
I am not one of the unemployed however see the need for Unemployment extensions… The fact that Congress cannot find other cuts is unacceptable; they always go after what is needed the most and save their pet projects and Wall Street friends.
Congress needs to be held accountable for the their failure to create a jobs bill and a jobs market. Extending Unemployment is not the answer however it what is needed now.
The Answer is to create jobs, which will take Congress placing higher taxes on any company that out sources jobs over seas, higher taxes on any funds leaving the US and higher tariffs on imports. Until then we have to pay out unemployment for the failure of our leaders.
Support unemployment here, it is one of Change.org highest all time petitions.http://www.change.org/petitions/view/the_99ers_need_ a_tier_v_added_ to_unemployment _benefits


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Visitor
Comment posted June 24, 2010 @ 5:39 pm

agreed – Way Way Too Late ( in first comment.)

saw this news story this morning

“Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.”.

they could drop mortgage rates to ZERO and it still would not help me and the other 600+ people laid off by previous employer – need a J – O – B to qualify and guess what ?? ain't got one and do not see one anywhere on the horizon.


chicagogal
Comment posted June 24, 2010 @ 5:42 pm

Not only has our government failed us, but they are not even looking at the fraud that was, and is continuing, to be perpretrated against us by the mortgage servicing companies. Every single person who receives a foreclosure notice should demand that their servicing company provide the original “wet ink” copy of the loan document and note that you signed at closing – not a copy that they printed from your county recorder's office. If they cannot produce those, they cannot prove that they are the legal owner of your loan and cannot file foreclosure against you.


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Alcatraz
Comment posted June 24, 2010 @ 7:51 pm

The HAMP program is not an agent who succeeds or fails at doing something. The HAMP program was expected to be administered by banks, who have failed to implement it. Perhaps the Obama administration did not push them hard enough ot give them enough incentive, but the program itself was a good idea and could have helped people like myself who are not completely underwater or unemployed, but needed a lower interest rate to make it through tough economic times.

I wish more media would report on what banks have actually done to administer the HAMP. There is so much info on the internet from disgruntled HAMP applicants, but no info on exactly how much banks have put toward HAMP in the way of resources, why they are all failing to refinance mortgages of all these applicants. No one is holding them accountable for this failure.

Please do write about this further, with the question of how the banks failed the program.


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[...] In the meantime, those out of luck continue to wait. Out of options, Monroe-Olcott decided to apply for a loan modification from her bank. (Her mortgage has been sold between banks five times.) “If we are foreclosed on, I could put my father and husband in a nursing home, and me and my son will walk the streets. There is no welfare if you own a home, and you can’t get welfare if you do not have a permanent address!” She expects to hear back from Chase in 60 to 90 days.washingtonindependent.com/88160/aid-to-the-unemployed-facing-foreclosure-too-little-too-late [...]


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[...] In the meantime, those out of luck continue to wait. out of options, Monroe-Olcott decided to apply for a loan modification from her bank. (Her mortgage has been sold between banks five times.) “If we are foreclosed on, I could put my father and husband in a nursing home, and me and my son will walk the streets. there is no welfare if you own a home, and you can’t get welfare if you do not have a permanent address!” She expects to hear back from Chase in 60 to 90 days.washingtonindependent.com/88160/aid-to-the-unemployed-facing-foreclosure-too-little-too-late [...]


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Comment posted June 30, 2010 @ 7:36 pm

This article omits that HAMP fails because it does not allow unemployment income to be qualified for mortgage payment UNLESS you can you prove you have atleast 9 months remaining. Now that is difficult when the initial benefit is only 6 months and the extensions are 7, 13, or 20 weeks (0 if it was up to the republicans!).

So.. in the mean time banks put these people on forebearance agreements because they can't modify, which still puts the mortgage in arrears instead of corrects the arrears, and makes the path to foreclosure even longer and more painful.

I'd like to know how many people could actually afford a reduced payment on unemployment but the banks don't allow them to make on because the government program doesn't allow them to accept unemployment funds!

The government, in conjunction with the banks, are driving people to foreclosure and bankruptcy as the only resort to protect themselves. Everyone gets screwed and nobody wins. SAD!


abcornwell
Comment posted July 1, 2010 @ 10:33 pm

Agree 100% with you Alcatraz. I know from my personal experience with Wells Fargo. I had a trial mod from Wachovia, everything went fine, then Wells Fargo took over Wachovia and it's been a nightmare. Their reps give the wrong information, they lose documentation, they do not communicate deficiencies in information so the homeowner can get the information into the record. Despite my calling every week and asking what do you need, do you need more or different info, my “file” has been closed three times when the 45 day time limit is reached, and the excuse is “lack of documentation” (this despite the fact that I have provided everything asked for, many times over and in the format requested). There is zero accountability, no advocacy for struggling homeowners, and the Wells Fargo rep or processor just shrugs their shoulders and says “Sorry. Your file is closed. Apply again.” So now 6 months has passed, I have used up more of my unemployment benefits, and Wells Fargo is tacking more late fees onto the back of my mortgage. I cannot find a lawyer to help, but am filing complaints with any agency that might help, and am contacting my senator (the one who cares, not the Republican Burr who doesn't).

So the media really needs to drill down into the ways the banks / servicers are falling down and screwing homeowners, and how almost impossible it is for a homeowner to find any advocate who can get the bank to toe the line!


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I recommend that Congress address unemployment in this way. For those that have lost jobs during these WallStreet greed times, the use of 401Ks shoud be forgiven as we have exhausted all means necessary to survive. Is there anyone out there in agreement. That's the way I see it. Keep the faith


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Comment posted July 17, 2010 @ 9:09 pm

They have done the same to my mom! who is disables 73year old woman.. who has had her home for almost 40years. I have done all the calling and faxing of documents..And now they have denied her for the Hamp loan due to income issues. After doing this application more than 4 times and waisting over a year of time on this. We have gotten the run around over and over. Now we received a letter saying that the how proceedings for forclosure are set. She has been crying everyday since and I feel hopeless due to the fact that I was laid off my job in feb and have not been able to find anything yet. The HAMP loan doesnt even accept my unemployment as income. So now my mother disabled and on social security is gonna lose her home. Is there anything anyone knows of that we might be able to do here in florida?


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Comment posted July 29, 2010 @ 7:07 am

So.. in the mean time banks put these people on forebearance agreements because they can't modify, which still puts the mortgage in arrears instead of corrects the arrears, and makes the path to foreclosure even longer and more painful.


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I recommend that Congress address unemployment in this way. For those that have lost jobs during these WallStreet greed times, the use of 401Ks shoud be forgiven as we have exhausted


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So.. in the mean time banks put these people on forebearance agreements because they can't modify, which still puts the mortgage in arrears instead of corrects the arrears, and makes the path to foreclosure even longer and more painful.


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Pingback posted August 16, 2010 @ 2:12 pm

[...] is initiating a program to help the unemployed stay in their homes: Qualified applicants will get zero-interest loans of up to $50,000 for two [...]


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Pingback posted August 29, 2010 @ 1:16 pm

[...] Aid to the Unemployed Facing Foreclosure: Too Little, Too Late … orters on Wednesday.Housing experts say that the provisions should help those hardest hit by the employment and housing crises but worry that the damage might be done. Already banks have foreclosed on millions of homes and 5.5 million more are in the foreclosure pipeline. Barry Zigas the director of housing policy… [...]


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Comment posted September 2, 2010 @ 3:54 pm

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Pingback posted September 8, 2010 @ 4:02 pm

[...] Aid to the Unemployed Facing Foreclosure: Too Little, Too Late … orters on Wednesday.Housing experts say that the provisions should help those hardest hit by the employment and housing crises but worry that the damage might be done. Already banks have foreclosed on millions of homes and 5.5 million more are in the foreclosure pipeline. Barry Zigas the director of housing policy… [...]


j alexander
Comment posted September 15, 2010 @ 1:32 pm

The HAMP is yet another Rip-off of the American tax-payer, “a very carefully designed program”, quoting Geithner, with the purpose of allowing banks time and money to clear the books–NOT to assist desperate homeoowners ! It is a total DISGRACE and it should be STOPPED !! Is there anybody home here ??

Madashellincarsoncity.


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[...] Aid to the Unemployed Facing Foreclosure: Too Little, Too Late … orters on Wednesday.Housing experts say that the provisions should help those hardest hit by the employment and housing crises but worry that the damage might be done. Already banks have foreclosed on millions of homes and 5.5 million more are in the foreclosure pipeline. Barry Zigas the director of housing policy… [...]


Natalierocco4ever
Comment posted September 16, 2010 @ 11:49 pm

Where are the people who have been foreclosed on going? What if they have no where else to go?


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Comment posted September 20, 2010 @ 8:00 pm

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Pingback posted September 24, 2010 @ 12:14 am

[...] Aid to the Unemployed Facing Foreclosure: Too Little, Too Late … orters on Wednesday.Housing experts say that the provisions should help those hardest hit by the employment and housing crises but worry that the damage might be done. Already banks have foreclosed on millions of homes and 5.5 million more are in the foreclosure pipeline. Barry Zigas the director of housing policy… [...]


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Pingback posted October 4, 2010 @ 1:25 pm

[...] Aid to the Unemployed Facing Foreclosure: Too Little, Too Late … orters on Wednesday.Housing experts say that the provisions should help those hardest hit by the employment and housing crises but worry that the damage might be done. Already banks have foreclosed on millions of homes and 5.5 million more are in the foreclosure pipeline. Barry Zigas the director of housing policy… [...]


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Trackback posted November 8, 2010 @ 3:29 am

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Jadeonthego
Comment posted November 12, 2010 @ 12:09 am

I had a home modification done in 2009 from Indy Mac.. Im still struggling, it did not help. it was not a hamp modification. im not behind but i see it coming. on social security and cant seem to live.


liz
Comment posted November 12, 2010 @ 12:17 am

There is housing for the aged, that goes by there income in all parts of florida, go under housing for the aged, housing for low income for seniors and a list of places comes up in differenent counties. they go by her income, there is set amount the senior cannot make over. but if she could get in one of these places, it would benefit her…


liz
Comment posted November 12, 2010 @ 12:21 am

she can possible get a place, if you look under florida low income housing for seniors. or apartments for low income seniors. you do have to make below a certain amount in social security. but they are in many counties of florida. if not she can still apply for senior apartment housing that she may be able to afford. wishing her the best


me
Comment posted November 12, 2010 @ 12:31 am

Obama is bullshit along with the Bankers, The Investors and the lawyers who do not get it.. I am not behind on my mortgage, not yet anyway.. but i like every american is struggling where soon it will be to a point i will be in that boat. What ever happened to For the People, By the People, Of the People.. They screwed every middleclass american, just to line their pockets, now the lawyers and judges who get it, should put them all behind bars, for if we committed such a thing, the key is thrown away. If you an employee steal your employers money
, you will be arrested and thrown in jail, well its about time they look at the big wigs who have been stealing from the people for many years. Every American should stand up, whether you pay or not and demand justice be served. If they give lower rates to unemployed americans, they should give low rates to individuals who make under a cetain amount should also get lower rates.. The rich should then pay out of their pockets for the Fraud that took place and lined their pockets for many many years, or face a jail sentence. which should it be… Your Call, or the American People will make the decisions for all of you, Revolution, I see a Revolution coming


Jadeonthego
Comment posted November 12, 2010 @ 12:40 am

I see ads that make me laugh, best rates for those in trouble. 4.2 interest rate,, low rates,, lmao, how are they suppose to get a mortgage you a**wipes.. Once again, it is for the people who are current with good credit.., what help is that.. Once again..Idiots.. Help those who need help…


Norma in IN
Comment posted December 14, 2010 @ 11:41 pm

Emily, I totally agree! I am cruising through here, while just numbed. My husband lost his job at 57 after 24+ years with the company due to down-sizing 13 months ago. He went for an interview today (1 of 5 in the last year …) that included a 2 hour mathematical test, a personality testing & some kind of pre-screening test. After 4 hours & getting through all 3 stages, he waited … In an interview the guy who was looking at his impressive resume asked, “How much industrial experience have you had in the last 10 years?” – I don’t think the guy could read! His most recent employment shows the last 35 years in the oilfields … ummm My husband said, “I have none, but you were the ones to call me off Monster.com!”

We have been in our dream home we built 11 years and were happily planning retirement. As you say, if only we were allowed to make lower payments in line with the modified value of our home! However, it is a ‘catch 49′ … !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

It spirals & snowballs so fast. One minute we were current and then after 2 late payments, you suddenly realize it is futile. We can’t guarantee an income and so you quit paying…

Just this week, we received Bank of America’s note to send to foreclosure department saying, call this 800 # to discuss your options ….
Surely, temporarily modifying on short 12 month terms, if you were actually honoring some kind of schedule plan and maybe tail ending fees on the back of the mortgages, while the banks try to manage this mess would be a better solution? Unemployment > foreclosures > devalues neighboring homes > compounds everything & helps nobody


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