The FHA Short Refinance program, made available to loan servicers in June but formally launched in October, has resulted in just 15 refinances as of December 31, according to Congressional testimony from the Special Inspector General, Neil M. Barofsky.
A short refinance is a transaction in which a mortgage lender agrees to pay off a borrower’s existing mortgage and replace it with new a loan with a reduced balance in order to prevent foreclosure.
In a quarterly report to Congress, Barofsky slammed efforts made by the Treasury to halt foreclosures and improve the housing outlook.
He noted that just 522,000 permanent loan modifications were active under the Making Home Affordable program as of year-end, with approximately 238,000 funded via TARP and the rest by the GSEs, Fannie Mae and Freddie Mac.
But a combined 792,000 permanent and trial loan mods have also been cancelled, and more than 152,000 trial mods are still “in limbo.”
“These permanent modification numbers pale in comparison not only to foreclosure filings, but also to Treasury’s initial prediction that HAMP would “help up to 3 to 4 million at-risk homeowners avoid foreclosure” “by reducing monthly payments to sustainable levels,”” said Barofsky.
Last month, the Congressional Oversight Panel said only about 700,000 foreclosures would be prevented via HAMP, but Barofsky expects that total to be even lower, given the soft number as of late.
Meanwhile, RealtyTrac expects foreclosure filings to surpass the three million mark in 2011, increasing 20 percent from the 2.9 million seen last year.
The Treasury also wasn’t able to produce any numbers tied to HAMP’s Principal Reduction Alternative program, which was also formally launched in October to help underwater homeowners.
In other words, expect more foreclosures and lower home prices.
Does the Hope for Homeowners program helping just one borrower back in 2009 ring a bell?