Lisa Simpson
Apr 27,2010
In: Mortgage

Mortgage Help Programme Exposing Borrowers to more Scams

The mortgage help programme is exposing borrowers more to scams.

The mortgage help programme is exposing borrowers more to scams. The Obama government has made some recent changes to its assistance programme but that seems to be inviting more trouble from scammers.

Last March some changes were made that was intended to make things easier for borrowers trying to skirt foreclosure. But the steps are not sufficient. It has failed to warn the people about the likelihood of fraud and enough safeguards have not been included to stop its abuse. This was the opinion of the Special Inspector General for TARP, Neil Barofsky.
In a quarterly report he noted, “Criminals feed on borrower confusion, and frequent changes to the programs provide opportunities for experienced criminal elements to prey on desperate homeowners.”

In March the HAMP plan involving $75 billion was revised. Since its debut about a year ago it has not shown satisfactory results. It had targeted to help 3 million to 4 million borrowers facing foreclosure by giving incentives to lenders to reduce the monthly payments of the homeowners. Till now only 170,000 have been able to get their mortgages permanently modified. The small numbers are drawing harsh criticism from all sides.

Responding to this the government has brought about many changes. The lenders are being pressurized to reduce the principal. It is hoped that this would help those who have gone underwater with the value of their houses being less than the loan amount. Also it the borrowers who are unemployed could get their mortgage payments brought down to 31% of their income for three months – extended to six months.

Referring to the changes Brofsky referred to the alterations as “a potentially important step forward for homeowner relief.” But he had his reservations and talking about the changes he said these were announced “with great fanfare, little was done at the time to warn borrowers” about the scammers it invited because of the defects. The original plan has already produced a bunch of frauds. The borrowers were tricked into paying upfront fees to get their loans modified – something that never took place.
One of the changes introduced recently was regarding the value of the house. The Treasury said that in instances of reduction of mortgage principal, appraisal would not be necessary. This could result in the lenders falsely applying for incentive awards. The Treasury should have been more prudent in following the guidelines laid down by FHA that mandates appraising to be done by an appraiser approved by the FHA.