Aug 27, 2010

Why Hasn't the Make Home Affordable Program Worked?

In my previous blog, I talked about how the Making Home Affordable programs have not been particularly successful in keeping families in their homes, especially given the amount of money thrown at the problem. (See More Money for Foreclosure Prevention: Will It Help?) So this brings me to the next inquiry: Why haven't these programs worked?
 
There are three overarching reasons why the Making Home Affordable program has failed in its primary mission, which is to keep people in their homes.
 
  • First, the program has erroneously depended on the good faith of the American mortgage lending industry, a mistaken approach for many lenders.
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  • Second, many people facing foreclosure lack an income stream to support even a radical modification.
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  • Third, even if good faith among the banking industry was widespread and unemployment wasn't so high, the Making Home Affordable program was still doomed to fail because of the sheer number of people applying for modifications. As a whole, the banking bureaucracy has not been up to the task of processing this flood of modification requests, which has resulted in many applicants giving up out of disgust and despair.