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Paul Kiesel
Paul Kiesel
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Secretary Paulson is Optimistically Pessimistic

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Treasury Secretary Henry Paulson does not predict that the housing market will rebound anytime soon. Instead of trying to come up with new plans to combat the foreclosure crisis, and curb the declining housing market, Paulson feels more secure in correcting current programs that aren’t working. However, these programs never worked (or they never lived up to their inflated potential).

Hope Now is one of those programs that have helped such a limited number of homeowners, that the percentage of people seeking help to people that have actually received help is in the 10-20% range. According to Hope Now, millions of calls have been received, but only about 280,000 mortgages were modified. A little over a million borrowers were placed in repayment plans, but those types of plans are not as helpful to troubled borrowers and it can still land the mortgagee in eventual foreclosure. The idea of the Hope Now Alliance (group of mortgage lenders, servicers and counselors) helping at-risk borrowers is intended to help, it’s just that it lack the results it claims it can produce. One should look at Hope Now as a program that was established to minimize loss, but particularly so for the lenders and servicers. Also, most of the people helped thus far by Hope Now would have likely been helped otherwise (the 280,000 that have received loan modifications to date), as their credit or situation was better than the people who have been denied or told to try and exhaust other options first.

Secretary Paulson, instead of creating a new program that could help more borrowers (maybe in the seven figure range?), is trying to repair something that is totaled, rather, it’s not even salvageable. The original intention of creating Hope Now was to prevent a foreclosure crisis. Well, now we’re in one and it appears it will get worse before it gets better. A loan modification program needs to be created that can bring an independent third party into the discussion between borrower and lender/servicer in order for the borrower to be represented fairly. If not, Hope Now will continue to provide mostly stalemate situations, leaving the borrower in an impecunious situation and modifying loans that would have been modified anyway.

Below are remarks made by Paulson today via Bloomberg News:  

Paulson praised the Hope Now Alliance of mortgage lenders, servicers and counselors for helping at-risk borrowers, while adding that both the department and the group were working to improve results.

“We will continue to look for additional tools to reach and help homeowners and to make existing programs work more smoothly,” he said, cautioning that more declines may occur in months ahead. “We know the correction has further to go, and so we should not be surprised at headlines that note rising foreclosures and falling home prices.”

Paulson said the $168 billion economic stimulus plan enacted in February will help result in “a faster pace of economic growth by the end of the year.”

Overall, it continues to look like mortgagees will have to wait until the next administration arrives to help mitigate the foreclosure/subprime mortgage crisis. It would be wise to speak with a lawyer before next January, and see what rights you have based on your housing/financial situation.