Homeowner Mortgage Relief

by admin ~ November 6th, 2008.

Now that the Treasury’s Troubled Asset Relief Program has helped stabilize the financial system by injecting capital into some of the country’s largest banking institutions, the focus has shifted to the plan’s initiative on providing mortgage relief to distressed homeowners through loan modification. It’s one of the biggest challenges the plan could potentially face.

This initiative has received less attention so far, but a number of government officials have made mortgage relief a priority. As recently as Wednesday, the Treasury and the Federal Deposit Insurance Corp. has proposed a plan to guarantee the mortgages of up to 3 million homeowners. And FDIC Chairman Sheila Bair last week told the Senate Banking Committee, “There has been some progress — but it’s not been enough, and we need to act quickly and we need to act dramatically.”

With more than 765,000 foreclosures in the third quarter, each passing day sees an already dire situation deteriorate further. Fortunately, the nation already has the resources to address this challenge. But they must be mobilized in an effective, efficient manner for this phase of TARP to succeed.

Specifically, a broad-based homeowner relief program must answer the following questions:

Which borrowers would qualify? How can the program distinguish between those in need who may benefit and those beyond assistance?

How can they target the right borrowers with the right remedies, while minimizing cost to the taxpayer?

How can the program execute the modifications quickly and then monitor the modified loans’ performance?

What are the best ways to motivate banks, loan servicers and investors to cooperate with the program?

How can we ensure that accounting, performance metrics, reporting and communications are transparent and secure?

Fortunately, there are already several programs for distressed homeowners underway, albeit on a much smaller scale, like the FDIC’s program for borrowers whose loans are serviced by IndyMac Bank, and the FHA’s Hope for Homeowners program. These programs have provided relief to thousands.

However, mobilizing a TARP-style, “industrial strength” program will involve working with potentially millions of homeowners and hundreds of lenders and mortgage loan servicers. Many homeowners will be unaware of the program, and many will be wary of working with the government to provide mortgage loan modifications. It will be critical to get to these borrowers quickly, before their homes are foreclosed. Here are three suggestions to consider in any effort to quickly design and launch an industrial-strength program

1. Create a Program Mobilization Office
A program mobilization office (PMO) must be quickly established to organize, govern and operate this massive initiative. Commonly used by large corporations to handle crises or events such as major mergers, a PMO functions as a “mission control,” coordinating planning and execution, managing external vendors, resolving conflicts, and functioning as a clearinghouse for reporting. This is not something akin to a passive “special committee,” as we often hear about in Washington, but an action-oriented team.

The PMO would be staffed with mortgage, operations, regulatory, accounting and other specialists from the public sector and private industry. This team would design the loan modification company, agree on a governance model for all relevant parties, manage information, develop protocols for borrowers-lender dealings and ensure accurate program accounting and transparency.

2. Leverage Private Sector Infrastructure
While the government lacks the resources to quickly target qualified borrowers — much less contact them, encourage them to apply and, most importantly, execute the loan modifications — these capabilities exist in the private sector. The PMO would therefore weave together several private-sector participants with the resources and skills needed to scale up the operation.  >Read Complete Article

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One Response to “Homeowner Mortgage Relief”

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