Obama Administration Efforts to Help with Short Sales & Second Mortgages Not Succeeding

A year ago, the Obama administration launched two new foreclosure-prevention efforts.

Neither is succeeding to meet it's goals, according to the Treasury Department.

One program was designed to help modify second mortgages such as home equity loans. The other program to assist homeowners with a short sale of their home.

Only 17,000 homeowners have received modifications of second mortgages since the beginning of the program.

While most primary home loans are held by Fannie Mae and Freddie Mac or by other investors in mortgage securities, most of the second or junior-lien mortgages are held by banks. The banks have been reluctant to write down second mortgages because many homeowners are still making payments even if they owe more than the value of their homes. About $1 trillion of junior-lien home mortgages were outstanding last year, according to Federal Reserve data. The majority of those were held by commercial banks and the rest were owned by savings banks and credit unions.

Only 4,500 homeowners have completed the short sale program to date and only 10,000 borrowers have started the short-sale program. The short sale program officially known as Home Affordable Foreclosure Alternatives allows homeowners to get $3,000 if they complete a short sale.

Even the administration’s flagship program the Home Affordable Modification Program has seen 823,000 homeowners fall out of the program.