White House strives to breathe new life into home rescue plan

Washington: The Obama administration plans to announce today efforts to step up pressure on lenders participating in its massive foreclosure prevention programme in a push for transparency that should provide new details about the industry's performance.

The $75-billion (Dh275 billion) federal programme, known as Making Home Affordable, got off to a slow and frustrating start, but the administration has recently noted that more than 650,000 borrowers had signed up for it. Now the programme, which lowers mortgage payments to 31 per cent of a person's income, is facing questions about how many of the enrolled borrowers are actually qualified to receive its assistance.

A recent report by the Congressional Oversight Panel, which is monitoring the government's Troubled Assets Relief Program, found that fewer than one per cent of borrowers in the programme had moved from an initial trial modification into a permanent one.

Borrowers must make three payments and provide extensive documentation to convert into a permanent loan modification.

Complaint

Homeowners and consumer advocates have complained that even after submitting and resubmitting information, some borrowers have been told, with little or no explanation, that they do not qualify for the programme after all.

The Treasury Department already releases monthly reports on how many trial loan modifications lenders have completed. It has shown, for example, that some major lenders such as Bank of America have lagged behind competitors in signing up borrowers to the programme.

But beginning in December, the report card will also detail how many of the borrowers that lenders enrolled have made enough payments and provided enough documentation to move into a permanent modification, according to a Treasury official, who spoke on the condition of anonymity because the plan had not been publicly announced.

The administration initially gave lenders three months to complete that process, but extended it after lenders complained that it was difficult to get sufficient documentation from borrowers. It has also simplified some of the documentation required from borrowers to qualify for the programme.

The conversion of trial modifications to permanent ones is a key benchmark of the success of the programme, which the administration hopes will eventually help as many as 4 million borrowers.

Lenders are paid for helping borrowers under the programme, but do not receive their payments until the modifications have been made permanent.

The administration will also be announcing partnerships with state and local entities to help borrowers move into permanent modifications and more resources for borrowers looking for help, the Treasury official said.

Additional steps

"It's true that we are taking additional steps to enhance servicer transparency and accountability as part of a broader focus on maximising conversion rates to permanent modifications," the official said. "Additional details about this effort — which will also include partnerships with a broad array of organisations and new resources for borrowers — will be announced on Monday."

The administration has also been under pressure to prove its programme does enough to help unemployed borrowers, a growing part of the foreclosure problem. Borrowers with little or no income have fewer options to save their home, housing advocates say.

And government officials are set to announce rules as soon as this week on an expansion of the programme, giving lenders incentive money to allow borrowers to sell their homes for less than their outstanding balance, which is known as a short sale.