Study: Big Banks Failed To Save 800K Homes Under Obama Program
COLUMBUS, Ohio (CBS Cleveland) — A recent study finds that President Obama’s Home Affordable Modification Program failed to save 800,000 homeowners from foreclosure because of mistakes made by big banks.
The program was unveiled in 2009 in hopes to quell the housing crisis in where millions lost their homes due to the subprime mortgage collapse.
The study – conducted by researchers from Ohio State University and the University of Chicago among others – found that the target number of helping 3 million to 4 million homeowners fell short.
“[S]ervicers responded to the program by conducting more modifications among eligible loans, though the increase fell significantly short of the target of this intervention,” the study states. “Moreover, there was an adverse impact on the effectiveness of renegotiations performed outside the program.”
Instead of the 2 million homeowners it could’ve helped, 1.2 million were able to save their homes.
The study points the finger at a few financial institutions for letting the program fall short of its numbers. “This is largely because a few large servicers, with pre-program organizational design that was less conducive to conducting renegotiations, responded at half the rate of others,” the study states.
The study added that Obama’s homeowners program wasn’t inadequate but that the government failed to account that these banks were not capable of performing mortgage modifications.
“The presence of these factors — and the lack of understanding of their specific nature — poses a significant challenge to the ability of the government to quickly influence such intermediaries through provision of financial incentives, thus hampering policies that require voluntary participation of such firms.”