Home Sweet Loan

Foreclosures continue at near-record rates—but more federal help may be coming soon

Foreclosures continue at near-record rates both locally and nationally—and Congressman Raúl Grijalva isn't satisfied with the Obama administration's response to the problem.

He has called for additional federal help, and he's supported by two Tucsonans involved with the ongoing crisis.

"By any measure," Grijalva and 26 other House members wrote Treasury Secretary Timothy Geithner in a March 24 letter, "HAMP has fallen drastically short of expectations."

The federal Homes Affordable Modification Program (HAMP) was established in early 2009. It was intended to help stem the tidal wave of foreclosures sweeping the country, especially in housing-boom states like Arizona, by offering incentives to financial lenders to voluntarily modify qualifying distressed home loans.

Despite lofty goals of helping up to 4 million homeowners by 2012, as of the end of April, HAMP had only assisted about 300,000 households nationally. In Arizona, the numbers were just above 16,000.

During the early part of this year, there was mixed news on the foreclosure front in Pima County.

The good news is that the legal actions that begin the foreclosure process were down slightly from the 1,000-per-month average of 2009. The bad news is that a higher percentage (60 percent vs. 48 percent) of these actions were going all the way through foreclosure.

As a result of HAMP's less-than-stellar achievements, Grijalva and his fellow members of Congress wrote to Geithner that since the creation of the program, "the Treasury Department has not made significant progress in arresting foreclosures or attenuating their effect on our economy."

Pima County's housing program manager, Betty Villegas, unenthusiastically calls HAMP "better than nothing."

"Some people are being helped," Villegas says, "but a lot aren't." She adds that counselors who try to help households facing foreclosure "don't have a lot of faith in the system right now."

Another federal foreclosure-prevention program that doesn't impress Villegas is a fund established earlier this year for the "hardest hit" states.

Even though the state will be getting some federal assistance under the program, Villegas observes of the money: "It's open to the whole state, but there are no set-asides for Pima County, so Maricopa County will probably eat it up."

Villegas strongly recommends that those confronting foreclosure contact the "Don't Borrow Trouble" agency at 792-3087. Funded in part by Pima County and the city of Tucson, the agency (www.dbtaz.org) tries to assist households.

Richard Rhey, of the Southwest Fair Housing Council, shares Villegas' frustrations with the HAMP program.

"Has it worked?" he asks. "Not really, and that's a problem."

To make the HAMP program more appealing to lenders, in late March, the federal government added flexibility to assist unemployed homeowners and those with "upside-down" mortgages (where more is owed on the house than it is worth).

Possibly as a result of these changes, Villegas and Rhey acknowledge that mortgage lenders are starting to get more involved with the program. But Rhey adds, "It's taken them much too long."

Villegas says one complicating issue is the complexity of the loan-modification process. She has worked on a few HAMP loan modifications herself and characterizes them as "really hard."

"You constantly have to be calling (the lending institution)," she says, "and it's time-consuming. ... If you're aggressive, you can get results, but you have to know how to work through the system."

Regarding the economic fallout from the foreclosure mess, the 27 members of Congress who wrote Geithner stated: "Until the government slows foreclosures, any actions taken to correct the country's economic slide will be of limited value."

To address the shortcomings of HAMP, the members of Congress suggest an alternative from the Great Depression: They proposed the creation a federal entity based somewhat on the Home Owners' Loan Corporation (HOLC), in 1933.

This idea, which has been bandied about by political pundits for a few years, would establish an agency to buy distressed mortgages using funds from the government's already-authorized Troubled Asset Relief Program (TARP). Qualifying loans would then be modified to allow people to remain in their homes.

Instead of costing the taxpayers, this approach actually made the government some money when implemented during the Great Depression.

This program's advantage to those who want Washington, D.C., to get more involved with the foreclosure problem is that it makes an agency of the federal government the mortgage-lender. For opponents of government intervention in the marketplace, that's also the idea's major drawback.

Rhey believes it's an idea worth considering. "I think Grijalva has a good point," he says, "and it's an alternative that has to be considered."

Villegas agrees. "It's a real solution, and in Pima County, could make an impact," she agrees. "Our foreclosure problems are real, and we have to try to address them."

Whatever happens, Villegas predicts the federal government is about to take additional steps concerning the nation's ongoing foreclosure problem.

"I understand something more is going to happen soon, since things (with HAMP) aren't going the way they were anticipated," she says.

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