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Another Return to the 1970s

posted by Adam Levitin

The Obama Administration is finally goosing HAMP to try to deal with unemployment. Gosh, how long has that taken? The Congressional Oversight Panel was all over the need to do this starting in 2009, but the Administration was so wed to HAMP that it wouldn't listen to a darn thing. 

Now they're reinventing the wheel.  The new HAMP add-on module will extend FHA's Special Forbearance period from 4 months to a year if the homeowner is unemployed and otherwise qualifies.  In my mind, it's too little, too late.  It does ring slightly of some 1975 legislation that was unearthed by the Congressional Oversight Panel's Oct. 9, 2009 report.  On page 104:

There is precedent for such programs to assist the unemployed.  One such effort, the Homeowners‟ Emergency Mortgage Assistance Program in Pennsylvania, was discussed above in Section 8B.  The idea has also been authorized at the federal level.  In 1975, Congress passed the Emergency Homeowners‟ Relief Act.341  The Act provided standby authority for HUD to implement a program that would provide emergency loans and grants to help unemployed homeowners avoid foreclosure, and the Department of Housing and Urban Development –Independent Agencies Appropriations Act, 1976 (P.L. 94-116) appropriated $35 million to the Emergency Homeowners‟ Relief Fund in order to carry out this program.  HUD‟s final rule on the standby program stipulated that the HUD Secretary could implement the Emergency Homeowners‟ Relief Program if a composite index of mortgage delinquencies reached 1.20 percent, a threshold several times lower than present delinquency rates.  Because the threshold was never reached, the program was never implemented.  Nonetheless, it provides a model of assistance to unemployed homeowners to carry them through an economic downturn without imposing the deadweight losses of foreclosures on the economy.  

What the Administration would give if mortgage foreclosures were at 1.2%... As with the plain vanilla episode I just blogged about, it seems like the Administration is stumbling back into the 1970s. Let's hope that's not the case more generally.  But with high unemployment and the prospect of inflation....

Comments

Dodd-Frank provided $1 billion under the emergency program you reference in your post; HUD is just now getting it off the ground.

What the Administration would give if mortgage foreclosures were at 1.2%... As with the plain vanilla episode I just blogged about, it seems like the Administration is stumbling back http://www.deansale.com/ into the 1970s. Let's hope that's not the case more generally. But with high unemployment and the prospect of inflation....

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