Housing program less successful than expected

When the Obama administration announced a massive effort to help distressed homeowners in 2009, it set high expectations. The program, government officials said, would keep up to 4 million borrowers out of foreclosure.

“It will give millions of families resigned to financial ruin a chance to rebuild,” President Barack Obama said at an event announcing the effort. “By bringing down the foreclosure rate, it will help shore up housing prices for everyone.”

Six years later, Obama is preparing to leave office and the Home Affordable Modification Program was scheduled to accept its final applications last week having helped a small fraction of the homeowners officials initially expected. About 1.6 million borrowers have seen their mortgage payments lowered through the program, but about a third of those people eventually fell behind on their payments again.

“The president set out an ambitious goal that wasn’t met,” said Kevin Stein, deputy director of the California Reinvestment Coalition, a housing advocacy group. “It was definitely a step forward and step in the right direction, but it didn’t [reach its goal] and a lot of people ended up falling through the cracks.”

HAMP is one of the last remnants of the $700 billion taxpayer bailout effort, known as the Troubled Asset Relief Program, or TARP, put in place during the financial crisis. Some of that money, about $28 billion, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments.

It was launched in the midst of one of the deepest housing crises in U.S. history. Millions of people had taken out subprime loans that they could no longer afford, sending foreclosure rates to record levels.

The Obama administration set out to save more homeowners from foreclosure, but the effort has been bedeviled by complaints that banks repeatedly lost homeowners’ paperwork or incorrectly told them that they didn’t qualify for help.

The Treasury Department didn’t act quickly enough to force banks to abide by program rules, housing advocates have said. Nearly 70 percent of the homeowners who applied for the program were rejected, according to government data.