Home-Foreclosure Rescue Is Falling Short, Critics Say

(page 2 of 2)

) "Right now, we simply don't have enough data," Warren said.

One bright note in the panel's report is a cost-benefit analysis from Alan White, a Valparaiso University law professor. He estimated that the $50 billion program would spend $16,000 to $21,000 per borrower—counting both first and second liens—but that it was likely to be more than offset by savings to investors, taxpayers, and others. About a third of the savings would go to the investors holding the mortgages, White estimated; the rest would accrue to municipalities, neighbors of the borrowers helped by the program, and the assisted families themselves.

In a statement released Thursday night, Treasury spokeswoman Meg Reilly noted that the loan-modification program is "only one piece of the Administration's multifaceted effort" to stem the financial crisis. Citing a health-care subsidy for the unemployed and extended unemployment benefits, she said officials "continue to study further ways to help unemployed homeowners."

GAO Reports Other Shortfalls

A new GAO report points to other hitches in the Administration's housing effort. It notes that, as of late September, not a single mortgage servicer had signed on to the Treasury's program for modifying second liens—loans that are widely seen as a serious obstacle to assisting many homeowners. The GAO also found that internal controls and compliance oversight was only partly in place for the housing program. It also noted the agency had yet to name a Homeownership Preservation Officer, though it had made strides in filling other positions devoted to housing issues.

In releasing the latest figures, Treasury officials stressed that the federal government has pushed interest rates down, allowing some 3 million homeowners to refinance.

"We're very pleased to have reached this goal," Housing & Urban Development Secretary Shaun Donovan told reporters Thursday. "But we obviously still have a lot more to do in terms of helping American families keep their homes."

One Treasury official told reporters the Administration's loan-modification program was "reaching borrowers who have lost their jobs" or seen their work hours cut. That's because unemployment benefits are counted as income when calculating reductions in a borrower's monthly payment.

Representative Barney Frank (D-Mass.) and some Democratic senators are examining ways to offer direct assistance to unemployed homeowners, perhaps by postponing mortgage payments temporarily or with direct financial assistance. A bill introduced on Sept. 30 by Senator Jack Reed (D-R.I.) would provide funds to states to assist unemployed homeowners at risk of foreclosure.

Francis is a correspondent in BusinessWeek's Washington bureau.

Business Exchange

Track and share business topics across the Web.