The Treasury Department released Secretary Timmy Geithner's note to Nancy Pelosi this morning, and this caught my eye....announcing new dollar commitments from the extension of the TARP funds, limited to three areas, one of which states

We will continue to mitigate foreclosure for responsible American homeowners as we take the steps necessary to stabilize our housing market.

Timmy continued...

Even with this extension, we expect that TARP will cost taxpayers at least $200 billion less than was projected in the August Mid-Session Review of the President's Budget, including $25 billion in potential costs from new TARP commitments in 2010.  We expect that the vast majority of these potential costs would come from mitigating foreclosure for responsible American homeowners as we take the steps necessary to stabilize our housing market.


Timmy's note to Nancy comes on the heels of the news yesterday the the House of Representatives was considering additional measures to help those victims of the economy and extended high unemployment trends from foreclosure noted in my rec listed diary yesterday (thanks for the recs btw, feel free to rec again...)


An amendment from House Judiciary Committee Chairman John Conyers would let judges rework mortgages in the bankruptcy process. This measure has previously passed the House but died in the Senate. Still, industry observers, who argue that the bankruptcy measure would drive up the cost of credit, said that including it in regulatory reform brings the issue back to life and could make it a bargaining chip in negotiations between the House and Senate. "You put it in there now because it preserves the opportunity to do cramdown through financial reform," said Jaret Seiberg an analyst at Concept Capital. "The fact is, the Senate is not going to get to this until late in the first quarter, and if there is a populist uproar in the first quarter, it's a lot easier to proceed if it's already in the House version."


The cramdown legislation is not the only amendment being offered in this bill either... witness

House Democrats are looking to tack several mortgage-specific amendments onto the financial services reform legislation moving through the lower chamber this week. One proposal from Rep. Maxine Waters of California would direct $3 billion of Troubled Assets Relief Program funds toward mortgage relief for unemployed borrowers, the Washington Post reported this week.

“While our key focus is on helping as many borrowers as quickly as possible under the current program, Treasury recognizes that unemployment presents unique challenges and is still actively reviewing various ideas and suggestions,” Allison said at the hearing, noting specifically the Homeowners’ Emergency Mortgage Assistance Program in Pennsylvania.


Full story can be found here: http://www.inman.com/...

You will note that I've highlighted some numbers in bold above, the 25 billion mentioned by Geithner and, a paltry in comparison, 3 billion in relief for unemployed borrowers.  There's quite a few billion in between, making one wonder just what Treasury has in mind.  Treasury's other two "new" TARP initiatives include

...provide capital to small and community banks, which are important sources of credit for small businesses.  We are also reserving funds for additional efforts to facilitate small business lending.
Finally, we may increase our commitment to the Term Asset-Backed Securities Loan Facility (TALF), which is improving securitization markets that facilitate consumer and small business loans, as well as commercial mortgage loans.  We expect that increasing our commitment to TALF would not result in additional cost to taxpayers.

The Obama Administration's HAMP program is widely seen as an abject Fail, likely to be amplified tomorrow when Treasury releases its monthly HAMP performance report which will for the first time include data on permanent modifications, known to be critically low prior to the official report.   Testimony to the House Finan ial Services committee yesterday included these critiques of HAMP from an industry expert..

Servicers were not equipped to handle HAMP’s origination-like functions, the program only considers borrowers’ first-mortgage payments, taxes and insurance, while neglecting other debts. The program also does not emphasize the re-equification of the borrower, she said.

“We believe that beating up on servicers to ‘do more’ poorly designed modifications won’t solve the problem,” Goodman testified. “The program as implemented is addressing the wrong issue.”

Principal reductions should be moved higher up the HAMP waterfall, she argued, saying investors would support such writedowns. To reduce the likelihood that borrowers would strategically default in order to lower their unpaid balances, a proper plan would create “significant frictions that would make a strategic default unattractive” (e.g., shared-appreciation features, impact on credit scores, limiting the ability to borrow against the mortgaged property).

Meanwhile, the FDIC chair and Bush Admin holdover Sheila Bair made very little headlines with her announced intentions late last week...Bair via Bloomberg

...may ask lenders to cut the principal on as much as $45 billion in mortgages acquired from seized banks, expanding her bid to aid homeowners as unemployment rises.

FDIC is facing criticism for the multiple loss-sharing agreements signed with banks that have taken over the numerous failed banks through FDIC's programs... some great essays on the problem can be found here and here - worth a read and a blog bookmark, IMHO.

Bottom line... movement towards helping the dying middle-class at least stay in their homes and not further erode the neighborhood, city and state fabric that is America.  Let's hope it keeps moving forward.  Keep your eye on the ball in the House this week as they debate the Economic Reform bill.

Originally posted to route66 on Wed Dec 09, 2009 at 04:33 PM PST.

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