The Obama administration has announced the extension of the Making Home Affordable program (HAMP), which was originally launched in 2009 as a way to prevent excessive foreclosure numbers, Reuters reports.
Treasury Secretary Jacob J. Lew stated that treasury funds being used for this project will also contribute to housing financing for the construction of more affordable rental housing, a market that has seen a dramatic boom, as a result of the economic crisis. More Americans are now renting, due to inability to access credit, or simply for fear of losing their homes again.
Originally, $46 billion in federal bailout funds was reserved for homeowners following the crisis, but as of yet, only $12.4 billion has been paid out. But Lew defended one of the administration’s key loan modification programs, HAMP, which has resulted in the restructuring of 1.3 million loans.
“As we know, our initiatives have not been a silver bullet,” Lew said. “But HAMP and our other programs cannot be judged only on what they have done directly for homeowners. Treasury’s housing assistance programs have become a model for the broader housing sector.”
The program has been successful so far in helping over 1.3 million Americans reduce their mortgage payments by around $540 a month, according to the Treasury Department. The newly announced proposals would funnel $500 million to $1 billion into the program, as opposed to the $363 million dollars it spent last year.
Congress has been asked by the administration to permit Ginnie Mae, a government-owned corporation, to issue securitized loans for the Federal Housing Administration (FHA). Lew stated that the Obama administration had directed him to operate to the fullest extent possible in the absence of Congressional approval.
This in part is due to the tense relationship between the executive and legislative branches, owing to Obama’s use of executive orders to bypass Congress. Until Congress moves on Ginnie Mae approval, the Federal Financing Bank will fund FHA-insured mortgages.
Not all are satisfied that the programs stemming from the secretary’s recent announcement will be substantially different from past efforts.
“We doubt that any significant policy change would be announced with such little lead time and as part of the closing remarks at a conference,” Isaac Boltansky, analyst at Compass Point Research & Trading, said. “Our sense is that the forthcoming program changes are likely to be narrowly targeted and largely symbolic.”
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