Obama's Home Affordability and Stability Program - Drawbacks and Pitfalls
Financial experts are skeptical about the plan, since not many American have benefited from the program. According to the predictions, the program was supposed to address approximately 3.5 million foreclosures and loan modifications by the end of 2009. However, findings indicate the program was able to help less than 150,000 applicants for loan adjustment, even after five months of its inception.
* The plan was announced in February, and thereafter it was difficult to motivate the loan modification companies, moneylenders and lending institutes to hire specialized staff trained in explaining the guidelines, and helping the loan applicants find a practical and effective solution that deals with their actual debt problems. The incentives failed to persuade the lenders in providing the loan alteration facilities, since they were not substantial enough.
* While implementing the loan modifications, the credit institutions started recorded losses, since the process was handled very slowly and without any impetus. In spring, the Congress was forced to hear strong pleas from the representatives of the mortgage industry, requesting the federal and state governments to allow the mortgage losses to be recorded in their account books. The incident resulted into bad publicity for the HASP plan, and potential applicants became more skeptical about availing the loan modification facility, since they thought their applications would not be entertained in the right manner.
* The Congress passed the bill in May, which enabled the home loans modification services providers with more freedom and flexibility while providing the credit to the individuals applying for loan. However, majority of the insurance companies failed to comply in reassessing the existing mortgage values and make it more compatible with the HASP plan. This made it difficult for the loan providers in providing the required flexibility to the applicants, since mortgages provide them with the protection against possible loan defaults.
* Experts feel the HASP plan is far more complex than originally thought, and it is going to be difficult to implement it effectively. The borrower needs to know and understand the guidelines properly to benefit effectively from the program. One of the major objectives of the plan is to avoid foreclosures. However, there are not enough trained personnel who can guide the applicants in working out the modification as per the debt incurred by the borrower. The HASP is to be customized to address the exact financial problem faced by the debtor, to make the monthly payments and the loan itself more affordable.
* According to Nicholas Retsina, the director of Harvard Universities Joint Center for Housing Studies, the HASP is gradually losing its focus in providing the loan change help, as far as the original guidelines are concerned. The market situation keeps on changing dynamically and it is imperative the Obama plan dynamically modify itself with the changing conditions. On practical grounds, the program fails itself to adjust itself to the market conditions, which makes it less effective. it is suggested the original guidelines be replaced by blanket guidelines to make the program more dynamic and beneficial to the people.
* A major mistake on the part of the Obama administration is the dismissal of all loan modification services offered by private law firms that usually negotiate the loan modifications and provide custom-made solutions that correctly cater to the debt conditions of the debtor. Loan modification can be a complex process for the average debtor to understand, and work out an acceptable solution. That is where law firms and experts come in, however the plan does not provide enough opportunities for these individuals to contribute much as far as the debt suffered by the borrower is concerned.
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Even though the basic purpose of the Obama Administration's Home Affordability and Stability Program (HASP) is to help out struggling American homeowners deal more effectively with their mortgage loan modification and debt problems, it is a fact that the program has yet to achieve the desired success.