Government watchdogs recently met with a Senate panel and told them that, in their opinion, the Obama administration's mortgage assistance programs are failing. In addition, the watchdogs told the Senate panel that the Treasury Department has been ineffective in its attempts to cure the program's problems. Special inspector general of all of the financial bailouts, Neil Barofsky, told the panel that the programs have not substantially lowered or stopped foreclosures.
The program has failed on a number of levels. The lenders get to decide which homeowners will qualify for the modifications. If an individual does qualify for a trial modification, the lenders have the final say over whether or not to permanently modify that individual's mortgage after they successfully complete the trial modification. There is no way that this program can succeed, on the whole, if the program is based on the lender's voluntary participation. In the majority of foreclosure cases the lender will make more money off of the house if they foreclosure and resell it. If the choice is theirs, why would they modify the loan?
