Geithner: ‘Weeks and Months’ Before Success of White House Anti-Foreclosure Plan Will Be Known
During today’s Senate Banking Committee hearing with Tim Geithner, the Treasury secretary indicated that, although many of the nation’s largest mortgage servicers have volunteered to participate in the administration’s loan modification program — and 55,000 modifications have already been offered — it’ll be awhile before the overall successes of that strategy can be gauged.
It’s just beginning. [We] can’t judge its effectiveness yet … We’re trying to create very strong incentives for servicers to participate and deliver and execute … I think it’s going to benefit a lot of people, but really won’t know the full scale of the benefits and how successful the modifications are until we have a few more weeks and months behind us on this.
Unmentioned here is that, by the initial design of the Treasury’s anti-foreclosure strategy, those “strong incentives” were meant to be accompanied by a strong disincentive for servicers to refuse modifications — namely, the threat that bankruptcy judges might alter the loans instead.
Of course, the Senate this month shot down a proposal that would have given struggling homeowners the option of bankruptcy — a route currently blocked for primary mortgages — and it was the absence of a lobbying push from the White House that contributed to the failure of that proposal.
So Geithner’s news that it will take weeks or months to determine how the carrots are working without the stick won’t be welcome to the ears of the rising number of underwater borrowers. Indeed, the 55,000 voluntary modification offers pale in comparison to recent foreclosure filings, which topped 342,000 in April alone.
Some Democrats, including Sens. Richard Durbin (D-Ill.) and Chris Dodd (D-Conn.) have vowed to bring the bankruptcy reform bill back again this year for another try. The question remains how they’ll do it.