Early in 2011, a number of states most affected by the recent housing market crisis received as much as hundreds of millions of dollars in federal money to help stem the flow of consumers losing their homes to foreclosure. But in one of those states, many problems still persist.

HomeSafe Georgia, the program launched in the wake of that state receiving close to $340 million to help unemployed homeowners duck foreclosure, has recently drawn criticism for doing alarmingly little to help those financially disadvantaged consumers, according to a report from the Atlanta Journal-Constitution. Since launching in April 2011, the program has given just $23 million in funds to less than 1,000 Georgians, even as 12,000 state residents receive foreclosure notices every month.

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Experts believe that the reason so few people have been able to receive help from HomeSafe Georgia in the past year is that the qualifications to do so are extremely stringent, the report said. One of the most troubling stipulations in the program is that unemployed consumers can be no more than six months behind on their mortgage payments. Many of the Georgians who would be helped by the program had been unemployed for far longer than that, meaning that they were ineligible for assistance even before the program existed.

HomeSafe Georgia receives about 400 or 500 applications in a given month, and about 20% of those end up being approved for entry into the program. Phil Foil, deputy commissioner at the Georgia Department of Community Affairs, says he’d like to see the number of applicants per month double.

“We are doing good things, but could be helping a lot more people,” Foil told the newspaper. “If we had to do it over again, we’d probably look at our marketing … and figure out how we’d get the word to unemployed folks quicker and better.”

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Though 18 states in all received substantial amounts of money to help troubled homeowners avoid foreclosure, many say that these programs have largely been unhelpful to Americans specifically because of the qualifications set forth on both national and state levels. On the other hand, some have argued that relaxing standards would result in too many people qualifying, and not receiving enough help on an individual basis.

Image: trint, via Flickr

I am a New Yorker. I am a Giants fan. They made my day last Sunday. Sorry, Gisele.

Like over 100 million of you, I saw the Chrysler commercial and, for the record, Clint Eastwood made my day.

Now, in the interest of full disclosure—my college flame was the granddaughter of a famous Chrysler design engineer—so I confess that I have a warm spot in my heart for those guys, but that said, how can you not appreciate the concept of “This is not a country that can be knocked out with one punch?”

Isn’t that what we Americans are all about?

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So I think it’s high time for us to decide whether better days or bitter days are ahead. I, for one, cast my vote for better days.

Unfortunately, there are those “nabobs of negativism” who would promote the “end of days” when it comes to our economy and the Obama Administration’s efforts to continue to pull us out of the fiscal bonfire that has consumed this nation for the past five years.

Steps that are proposed to ease the financial pain of the American people seem to follow a well-defined path. The President makes an eloquent speech announcing an initiative in general terms.  Even without specifics, the idea is debunked by critics usually on the right, but occasionally on the left as well.  The details are released, or a piece of legislation is introduced and it is pronounced dead on arrival.

At first blush, this would seem to be the case with the mortgage refinancing plan that Obama unveiled during the course of his State of the Union message. It was criticized before it was seen, and when the enabling legislation was introduced, most commentators simply assumed it would go nowhere. But if you read between the lines, you will discover something very different—and that difference exposes a most interesting philosophical dichotomy rarely found in the workaday, soundbite world in which we live.

[Article: Google's New Privacy Policy: Close But No Cigar]

The proposed new program is well thought out. There is to be no reduction in the principal amount of the mortgage, but FHA-guaranteed refinancing at today’s amazingly low rates would be permitted for anyone who wanted it, so long as they had a minimum credit score of 580, and an existing mortgage with a principal amount within the FHA’s limits ($271,050-$729,750). Borrowers would also have to be current on their mortgage payments for at least the last six months, and have not more than one delinquency in the six months prior to that. The program is estimated to cost between $5 billion and $10 billion, paid for with new fees on those financial firms that have more than $50 billion in assets. As far as it goes, this is a terrific plan, balancing many competing interests and spreading the costs around pretty effectively.

Conservative opposition to this plan has been predictable and not particularly vociferous, in light of the fact that the formerly liberal, now newly minted voice of the right has advocated that we let the foreclosure mess “run its course.” What’s different is the liberal reaction, from a whole host of different sources that seem to advocate a program that would reduce the principal amount of mortgages, as opposed to one that only makes payment-reducing refinancing easier. Their argument is simple—right now there are approximately 11 million homes in the United States that are worth less than the principal amount of the mortgages that encumber them. About one in every eight homes that has a mortgage is either delinquent or in foreclosure. At best, the Obama program would assist, at least to some degree, less than 4 million homeowners, and by definition none would be delinquent or in foreclosure. The unprecedented magnitude of these issues has led some observers to opine that the United States is in “a permanent foreclosure crisis,” one that can only be solved by forgiveness of debt in equally unprecedented magnitude.

Taking a step back and thinking about it, it becomes clear that those who push for actual debt forgiveness, which would involve the government taking by fiat an asset of a private lender—at best constitutionally dubious—must necessarily believe that housing prices will not return to their pre-2008 levels for a very long time, if at all.

[Article: Fannie, Freddie, the Feds & Freud... FUBAR]

So the philosophical question presents itself very naturally: What kind of America do those who advocate debt forgiveness envision? Unless you believe that all those new housing projects in the Gingrich moon colonies will vastly increase supply in the coming years, you must believe that our collective future is rather bleak—meaning at least that there will not be enough money or enough buyers to bring housing prices back to 2007 levels.

I believe that the foreclosure crisis is just that—a crisis about which something extraordinary must be done in the very short run; but I do not believe that it is permanent. That said, there are certainly some situations that will require lowering mortgage amounts, such as those involving lender abuse (the subject of the suit settled just last night by the 50 state attorneys general which allocated about $26 billion from the big banks, most of which will be used to reduce mortgage principal for about 1 million underwater homeowners and provide cash settlements of about $2,000 to 750,000 people who were foreclosed upon).

There are other solutions available that do not require an across-the-board suspension of the due process clause. I have often advocated for the SAM, or the shared appreciation mortgage, which gives to beleaguered borrowers exactly what they need (time, not money)—reduced payments but not reduced principal.

[Credit Cards: Research and compare credit cards at Credit.com]

Ultimately, the federal government is there to act in precisely the sort of situation in which 11 million homeowners find themselves in 2012. The right solution to the foreclosure crisis will be one that reflects the nature of the problem and the country; that is, one that reduces rate, not principal—except where appropriate—and recognizes that punishment is less important than solidarity. It will acknowledge that everyone contributed to this problem—banks, brokers, borrowers, and of course, the federal government itself. However, it will not sacrifice constitutional principle in the heat of this particularly searing moment in American history.

The Obama plan is not a solution, but it is a step in the right direction. We need to cooperate and collaborate with each other to solve the mortgage crisis and minimize the personal tragedy it engenders. And we need to find solutions that recognize that real estate prices will rebound, as will America in general. However difficult it is to muster it at this moment, optimism is something that has always characterized this country, and will continue to serve it well in the foreseeable future—and is something exuded by President Obama, as it was by Presidents Kennedy, Reagan, Clinton and other American icons…

You’re absolutely right, Clint. It is halftime and we can and will make the finish line.  That’s something we Giants fans understand all too well.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: Mr Lujan!, via Flickr.com

I am a New Yorker. I am a Giants fan. They made my day last Sunday. Sorry, Gisele.

Like over 100 million of you, I saw the Chrysler commercial and, for the record, Clint Eastwood made my day.

Now, in the interest of full disclosure—my college flame was the granddaughter of a famous Chrysler design engineer—so I confess that I have a warm spot in my heart for those guys, but that said, how can you not appreciate the concept of “This is not a country that can be knocked out with one punch?”

Isn’t that what we Americans are all about?

[Free Credit Calculator: Use Credit.com's Credit Report Card]

So I think it’s high time for us to decide whether better days or bitter days are ahead. I, for one, cast my vote for better days.

Unfortunately, there are those “nabobs of negativism” who would promote the “end of days” when it comes to our economy and the Obama Administration’s efforts to continue to pull us out of the fiscal bonfire that has consumed this nation for the past five years.

Steps that are proposed to ease the financial pain of the American people seem to follow a well-defined path. The President makes an eloquent speech announcing an initiative in general terms.  Even without specifics, the idea is debunked by critics usually on the right, but occasionally on the left as well.  The details are released, or a piece of legislation is introduced and it is pronounced dead on arrival.

At first blush, this would seem to be the case with the mortgage refinancing plan that Obama unveiled during the course of his State of the Union message. It was criticized before it was seen, and when the enabling legislation was introduced, most commentators simply assumed it would go nowhere. But if you read between the lines, you will discover something very different—and that difference exposes a most interesting philosophical dichotomy rarely found in the workaday, soundbite world in which we live.

[Article: Google's New Privacy Policy: Close But No Cigar]

The proposed new program is well thought out. There is to be no reduction in the principal amount of the mortgage, but FHA-guaranteed refinancing at today’s amazingly low rates would be permitted for anyone who wanted it, so long as they had a minimum credit score of 580, and an existing mortgage with a principal amount within the FHA’s limits ($271,050-$729,750). Borrowers would also have to be current on their mortgage payments for at least the last six months, and have not more than one delinquency in the six months prior to that. The program is estimated to cost between $5 billion and $10 billion, paid for with new fees on those financial firms that have more than $50 billion in assets. As far as it goes, this is a terrific plan, balancing many competing interests and spreading the costs around pretty effectively.

Conservative opposition to this plan has been predictable and not particularly vociferous, in light of the fact that the formerly liberal, now newly minted voice of the right has advocated that we let the foreclosure mess “run its course.” What’s different is the liberal reaction, from a whole host of different sources that seem to advocate a program that would reduce the principal amount of mortgages, as opposed to one that only makes payment-reducing refinancing easier. Their argument is simple—right now there are approximately 11 million homes in the United States that are worth less than the principal amount of the mortgages that encumber them. About one in every eight homes that has a mortgage is either delinquent or in foreclosure. At best, the Obama program would assist, at least to some degree, less than 4 million homeowners, and by definition none would be delinquent or in foreclosure. The unprecedented magnitude of these issues has led some observers to opine that the United States is in “a permanent foreclosure crisis,” one that can only be solved by forgiveness of debt in equally unprecedented magnitude.

Taking a step back and thinking about it, it becomes clear that those who push for actual debt forgiveness, which would involve the government taking by fiat an asset of a private lender—at best constitutionally dubious—must necessarily believe that housing prices will not return to their pre-2008 levels for a very long time, if at all.

[Article: Fannie, Freddie, the Feds & Freud... FUBAR]

So the philosophical question presents itself very naturally: What kind of America do those who advocate debt forgiveness envision? Unless you believe that all those new housing projects in the Gingrich moon colonies will vastly increase supply in the coming years, you must believe that our collective future is rather bleak—meaning at least that there will not be enough money or enough buyers to bring housing prices back to 2007 levels.

I believe that the foreclosure crisis is just that—a crisis about which something extraordinary must be done in the very short run; but I do not believe that it is permanent. That said, there are certainly some situations that will require lowering mortgage amounts, such as those involving lender abuse (the subject of the suit filed by the 50 state attorneys general which is expected to produce a settlement of about $25 billion from the banks, most of which will be used to reduce mortgage principal in certain cases, or in extraordinary incidents of personal hardship or geographical problems that threaten entire neighborhoods).

There are other solutions available that do not require an across-the-board suspension of the due process clause. I have often advocated for the SAM, or the shared appreciation mortgage, which gives to beleaguered borrowers exactly what they need (time, not money)—reduced payments but not reduced principal.

[Credit Cards: Research and compare credit cards at Credit.com]

Ultimately, the federal government is there to act in precisely the sort of situation in which 11 million homeowners find themselves in 2012. The right solution to the foreclosure crisis will be one that reflects the nature of the problem and the country; that is, one that reduces rate, not principal—except where appropriate—and recognizes that punishment is less important than solidarity. It will acknowledge that everyone contributed to this problem—banks, brokers, borrowers, and of course, the federal government itself. However, it will not sacrifice constitutional principle in the heat of this particularly searing moment in American history.

The Obama plan is not a solution, but it is a step in the right direction. We need to cooperate and collaborate with each other to solve the mortgage crisis and minimize the personal tragedy it engenders. And we need to find solutions that recognize that real estate prices will rebound, as will America in general. However difficult it is to muster it at this moment, optimism is something that has always characterized this country, and will continue to serve it well in the foreseeable future—and is something exuded by President Obama, as it was by Presidents Kennedy, Reagan, Clinton and other American icons…

You’re absolutely right, Clint. It is halftime and we can and will make the finish line.  That’s something we Giants fans understand all too well.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: Mr Lujan!, via Flickr.com

If you’re a homeowner who is struggling to keep up with a mortgage you can’t afford, or wondering whether to continue to stay and pay on a home that is deeply underwater, you may have seen another glimmer of hope in yesterday’s news about more proposals to address the housing crisis.

Early Wednesday, preliminary details of a proposed mortgage settlement between five big banks, state attorneys general and the Obama administration, all of whom have been negotiating for months now, were released.

Under the proposed settlement, five of the largest banks would allocate $25 billion (not all in cash) to be used to refinance or modify mortgages, as well as provide principal reduction for some homeowners. Some of the settlement funds would go to state foreclosure relief programs, and a portion would be used to provide restitution for homeowners who were the victims of abusive foreclosure tactics. Those homeowners would get checks averaging roughly $2000; no doubt amounting to insult after the injury they’ve gone through while losing their homes.

The Center for Responsible Lending, an advocacy group that has been raising concerns about mortgage abuses since the beginning of the housing crisis, said the proposal wasn’t perfect but did “represent an important step forward in addressing foreclosure abuses” by putting an end to robo-signing and servicer abuses, and by promoting “more sustainable mortgage modifications.” Other activist groups are urging a postponement until further investigation.

No deal has been finalized.

[Related Article: Underwater On Your Home? Your Six Options]

The President’s Plan

Later that evening, President Obama raised the housing crisis in his State of the Union address. He made two proposals to help the market:

• The opportunity for “every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates.  No more red tape.  No more runaround from the banks. “
• Calling on the “Attorney General to create a special unit of federal prosecutors and leading state attorney[s] general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.” It will include expanded “investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.”

No specific details of the refinance proposal were released last night, but many are skeptical that the program will go far enough, or that Congress will approve additional measures to help homeowners. TheStreet.com says that analysts are already calling the plan “dead on arrival.” Even if the President is able to expand refinancing opportunities, the sobering fact is that some 11 million homeowners owe more than their homes are worth, and their average negative equity is $65,000, according to CoreLogic. By comparison, $25 billion is a drop in the bucket.

However, neither the initial details of the settlement, nor the President’s announcement, gave struggling homeowners any specific action they can take to try to get help now; any reason to believe that they will be eligible for help so they can keep their homes; or that the housing market will recover anytime soon. Instead, they’re left to keep hanging in there, hoping things might be different this time around.

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Why Can’t the Housing Crisis Be More Like the Banking Crisis?

If the government approached the housing crisis the way it did the banking crisis, things might be different, says former TARP General Inspector Neil Barofsky. In this video interview with the American Banker, he says, “They went all in. No cap on resources, tapping every available resource…trillions and trillions of dollars.” But “when it came to the housing market,” he says, “it just wasn’t there.” Comparing the help the banks received under TARP to what homeowners haven’t received, he pulls no punches: “they have a lot more sympathy toward the larger financial institutions, frankly, than to the homeowner on Main Street.”

Once again, the word to struggling homeowners is to sit tight. Hopefully, help is coming. But no word on what happens if it doesn’t.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: trint, via Flickr.com