Crazy Nut Job

(via)

Only about a third of the homeowners who have successfully completed the trial period of the Obama administration’s mortgage modification program have been offered permanent relief, according to new federal data obtained by the Huffington Post.

The conversion rate — about 33 percent — is woefully short of what the Treasury Department had forecast. Treasury thought the rate would be “ranging up to 75 percent,” Herbert M. Allison Jr., assistant secretary for financial stability, told the Congressional Oversight Panel in October.

Honestly, when the HuffPo is harder on an Obama program than I am, someone had silly expectations (ok, the Treasury Department forecast 75%, but remember that our Treasury Secretary is largely responsible for the Asian currency crisis, was the regulator in charge of AIG when it failed, and couldn’t figure out how to properly use TurboTax). A 33% success rate is phenomenal for any rescue program. Remember, these are people who would be foreclosed on in absence of the program.

Now, we can debate whether or not such a program is a worthwhile expenditure (and I fall into the “nay” category on that one), but can you imagine a program that converts delinquent borrowers into “current” homeowners at anywhere near a 33% success rate in this housing environment that wouldn’t be an open door for fraud an abuse? I mean, aside from the government simply buying people houses (‘cause that’s not ripe for abuse)? Did anyone actually buy the 75% figure anyway?

Of course, many of these people will still end up getting foreclosed on at some point in the future, but absent significant principle reductions, that’s just a fact of life. This program still exceeded rational expectations. Also, it’s nowhere near as stupid as the homebuyer tax credit, which cost taxpayers an amount greater than the median home price for each additional home sold (yes, it would have been more efficient for the government to simply buy people homes. Now who has a problem with HAMP?—Aside from me, that is).

This article is rather timely (via).

Reports of lenders repossessing the wrong home are further tarnishing the banking industry’s image, already bruised by bailouts and bonuses.

The mix-ups have been perpetuated by the sheer number of foreclosures being processed today as well as the various layers of communication involved. Addresses and other information passed from one department to another, or from a contractor to a subcontractor, can get garbled along the way.

…

Though such gaffes are rare, they have happened enough times to lead at least one major servicer to rethink and retool its default-management process. Bank of America Corp., the nation’s largest servicer, is updating its contractor-training tools and adding a step when securing a property to ensure that the right home receives the repossession notice.

B of A “rekeys” - changes the locks - on about 16,000 properties a month, said Rebecca Mairone, the Charlotte company’s head of servicing. In the last seven months, B of A is aware of just 11 mistakes. That gives it an accuracy rate of about 99.99%.

For those on the losing end of those 11 mistakes, the consequences can be rather severe. Still, the consequences are less than those for the death penalty, and we don’t claim to have nearly as high an accuracy rate on that. Ok, that was unnecessary and non-topical snark. I really just wanted to share this article because it actually provided some numbers for things I had previously only seen single cases reported on.

The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey. That excludes the value of primary homes and defined-benefit pension plans.

Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009.

This is being reported everywhere today (I first saw it here). Is it any wonder that 7 in 10 Boomers are delaying retirement for financial reasons? I don’t actually fault most of these workers. Our monetary and tax policies discourage saving and promote borrowing as a means of expanding our economy. By some measures, this strategy has certainly worked. There are some costs, though. Austerity seems to be coming to the US. Some will adopt it by choice (frugality), others will have it thrust upon them (poverty).