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Mortgage rescues fall short for millions
A foreclosure sign hangs in front of a home in Miami.
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KAI RYSSDAL: There have been signs of life in the housing market for months now. New home sales ticking up, prices stabilizing.
Yesterday, the Obama administration said it has reached its goal of modifying half a million troubled mortgages ahead of schedule. That half a million, though, is just a small slice of homeowners at risk. And a report out today says despite the gains in the housing market, what's being done isn't enough to protect millions of American from foreclosure.
From Washington, Marketplace's Steve Henn reports.
Steve Henn: The Administration's Home Affordable plan has helped half a million homeowners modify their mortgages and reduce their payments.
Kevin Stein: That is not a small number, the largest number of people that have been helped by any federal plan.
Still Kevin Stein at the California Reinvestment Coalition is a critic. He says the plan was really set up to help folks in trouble with sub-prime loans. But...
Stein: In out state, we have over 12 percent unemployment and rising. And there really is nothing in place for families that have lost their jobs.
Even when Home Affordable is running at full strength:
Elizabeth Warren: Foreclosure will be out running modifications by more than 2 to 1.
Elizabeth Warren heads the Congressional Oversight Panel. She says banks still are not processing mortgage modifications quickly enough. And a new wave of mortgage resets is looming.
Mark Hanson: It's September 2007 all over again.
Mark Hanson is real estate consultant in the San Francisco Bay area. He says hundreds of billions of dollars in large, interest-only adjustable rate mortgages are about to reset. These so-called option ARMs let home buyers pay only interest for the first five years. When buyers have to start paying the principal there is often trouble.
Hanson: these loans have the lowest cure rate. And the highest loss severity than any of the loans. They are worse than sub-prime loans.
And many of these loans are concentrated California and Florida in some of the most expensive neighborhoods in the country.
In Washington, I'm Steve Henn for Marketplace.
He's in his 80's, his wife is a paraplegic in her late 70's, they have lost their fortune in the stockmarket, and just got their Notice of Default. They cannot afford to pay their taxes, nor their mortgage as their only income is Social Security and Meicare/Medical benefits. It's not so easy to move to an apartment with her wheel chair: access, stairs, hallway width, bathroom turnaround space, shower stall, tub out of the question. What can they do to stay in their home? Any ideas?
