An interesting aside in the interview I did today with Michael Barr, the Treasury Department’s Asst. Secretary for Financial Institutions. Barr is the architect of the Administration’s Making Home Affordable program, i.e. the housing bailout, and this was his first on-camera interview since he was sworn in as a Treasury official.
Barr was quite frank about the shortcomings of the program and honest about the Administration’s need to put the banks’ collective feet to the fire. They’re simply going to assess which banks are doing a lot and which are not, and then they plan to publicly criticize the ones that are not. It’s a pretty old strategy, but not necessarily ineffective.
As for the aside, I asked Barr about so-called “Jingle Mail,” that is borrowers who simply don’t want to stay in their homes due to lack of equity abandoning ship and mailing in the keys. In yesterday’s post, I gave an example of one such story.
Barr claims those are few and far between:
We don't see in the data borrowers who are walking away because they can or because their homes are underwater. We do see borrowers who are not able to make the payment because they've lost their job, they've had a serious crisis in their family, they're sick, they're ill, they had an accident. So the kinds of crises that families are experiencing that normally lead to default and foreclosure are the kinds of events that seem to be occurring today. We don't see data showing families just walking away from their home because they're underwater.
I assume the data he’s looking at is from the banks/lenders, but representatives of those same banks tell me that one of the biggest problem they have in modifying loans is that they can’t find the borrowers. Perhaps these are the people who he’s talking about, who had some kind of crisis, but I still think many are leaving voluntarily, and those numbers will show up at some point.
As for the housing market overall, citing unemployment and the foreclosure crisis, Barr concludes it’s far too soon to call a bottom to the housing crash.
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