First it was the banks, then it was the mortgage giants, and now it is real estate speculators who invested in multiple properties before the crash who are set to receive a taxpayer bailout.

Bloomberg News reported that in the Obama administration’s effort to prevent large swaths of foreclosures from destabilizing neighborhoods, it is expanding the Home Affordable Modification Program to landlords for up to four properties. The program, first introduced in 2009, pays banks to cut interest rates, elongate mortgage terms and, in some cases, forgive some principal debt.  However, HAMP has yet to provide aid to as many borrowers as hoped. [more]

FHFA Director Ed DeMarco

Despite opposition from much of the financial industry, the U.S. Treasury Department forged ahead with a plan to offer American homeowners principal reductions on their mortgages, CNBC reported.

In a major expansion announced late last week of its Home Affordable Modification Program, the Treasury will increase incentives to lenders who offer principal reductions, paying up to 63 cents on the dollar for those reductions. [more]

Fannie Mae and Freddie Mac improperly foreclosed on homeowners and cost the government billions of dollars by failing to hold major banks to strict lending requirements, according to a semi-annual report by a government watchdog group. The Federal Housing Finance Agency also gave “undue deference” to Fannie and Freddie officials and didn’t question giant bonuses granted to the mortgage giants’ executives, the inspector general said. [more]

A government evaluation of the Home Affordable Modification Program found it once again to be lacking, according to CNN. HAMP has undergone tweaks since it was introduced in April, but in a recent report, the Congressional Oversight Panel found little improvement in its performance. Instead of helping close to 4 million struggling mortgage borrowers keep their homes, HAMP will prevent only about 700,000 to 800,000 foreclosures. “I think the program has turned out to be a lot smaller and have a lot less impact than we thought it would,” said Ted Kaufman, the former U.S. senator from Delaware who is now chairman of the Congressional Oversight Panel. Since the Treasury Department lost the authority to further restructure the program at the end of October, banks are now offering more modifications through their own process rather than through the government’s. Among the reasons cited in the report for the program’s failure were that servicers were preventing or delaying modifications, and that many loans in trouble often came burdened with second mortgages, causing many banks to refuse to sign off unless they were paid. [CNN]

While lenders have notoriously struggled over the past year to convert three-month trial mortgage loan modifications to permanent fixes under Obama’s Home Affordable Modification Program, GMAC has a noticeably better track record than its peers. As of January, 17.5 percent of the delinquent mortgages it had serviced had become permanent modifications. Overall, lenders have granted permanent modifications to only 3.4 percent of participants in the three-month HAMP trials. GMAC’s superior performance in this realm may have a lot to do with its documentation requirements. The the former financial arm of General Motors, now under government control, requires homeowners to submit all paperwork before diving into a trial modification. Most others wait until the end of the three-month period to collect it, but beginning June 1, GMAC’s method will become law. The Treasury Department is requiring all servicers to gather the documents prior to granting trial modifications in order to avoid beginning the process with borrowers who ultimately won’t be able to come up with the paperwork. [USA Today]

On Christmas Eve, the government announced it would uncap the amount of bailout money allotted for Fannie Mae and Freddie Mac, giving the two mortgage giants any amount they need over the next three years. This week, in a Wall Street segment, financial journalists debated whether the move was a sign that the government is getting ready to prop up the housing market once again. “They don’t necessarily need the money, but the Treasury will lose its power to unilaterally give money to them at the end of next year,” said Nick Timiraos, a Wall Street Journal reporter. By increasing the amount of money given to Fannie Mae and Freddie Mac, the government hopes to increase the amount of aggressive writedowns on mortgages and improve the Home Affordable Modification Program, according to MarketWatch reporter Alistair Barr. “Since many people see their net worth as the value of their home, stability in housing is key even if we see a second dip in prices,” said Mike Reid, Dow Jones Newswires deputy managing editor. “The unlimited allocation to Fannie and Freddie will certainly prop up the housing market,” added Barr.

Citigroup said it has hired 1,400 employees for its mortgage business
over the past few months to meet the Obama administration’s mortgage
modification goals. The company has also invested in additional
telephone lines and infrastructure to process mortgage modifications.
The company already had about 2,600 employees dedicated to dealing with
late mortgage payments, said Sanjiv Das, CEO of CitiMortgage. The
division now has a staff of about 10,000, the same level it was at last
year before a several rounds of job cuts. Banks in the federal Troubled
Asset Relief Program, including Citigroup, are required to participate
in the government’s Home Affordable Modification Program. [more]

Some of the money that the Obama administration is spending on the Home Affordable Modification Program, aimed at homeowners facing foreclosure, is benefitting corrupt mortgage servicers, an Associated Press investigation found. Under the program, if a borrower who received a mortgage modification makes payments on time for three months, the mortgage servicing company that modified the loan may receive up to $5,500 for each successful modification. In order to receive a larger payoff, some companies have turned to illegal practices. Of the 38 servicers the government is paying to help distressed homeowners, at least 30 face lawsuits from homeowners and advocates claiming they charged illegally high fees; 14 have been accused of misleading customers before the program began; and three have settled federal predatory collection allegations by pledging to correct their behavior. The Treasury Department said it has no choice but to work with all servicers — refusing to work with a non-reputable firm would deprive homeowners whose mortgages came from that servicer from getting modifications, said Treasury spokesperson Jenni Engebretsen. [more]