Economics: For the Jobless, Little U.S. Help on Foreclosure

The Obama administration's main program to keep distressed homeowners from falling into foreclosure has been aimed at those who took out subprime loans or other risky mortgages during the heady days of the housing boom. But these days, the primary cause of foreclosures is unemployment.

The administration's housing effort does include programs to help unemployed homeowners, but they have been plagued by delays, dubious benefits and abysmal participation. For example, a Treasury Department effort started in early 2010 allows the jobless to postpone mortgage payments for three months, but the average length of unemployment is now nine months. As of March 31, there were only 7,397 participants.

As part of the bank bailout, the Treasury Department was given $46 billion to spend on keeping homeowners in their houses; to date, the agency has spent about $1.85 billion.

Morris A. Davis, a former Federal Reserve economist, estimates that as many as a million homeowners slipped into foreclosure because of insufficient help for the unemployed.

The money was there and they didn't spend it, said Mr. Davis, an associate real estate professor at the University of Wisconsin. I don't mean to sound outraged, but I am pretty outraged.

Administration officials said their programs have had a positive impact, albeit not as large as they had hoped. But they say that the problems of unemployment and negative equity on homes are not easily solved. They also say programs to curb foreclosure are voluntary, so they are limited in how far they can push mortgage servicers and investors, who often make more from foreclosures than from offering aid.

We are trying to be careful in designing programs that at the end of the day aren't just about spending money but getting people back on their feet, said James Parrott, a senior adviser at the White House's National Economic Council.

The debate is playing out on the sidelines of partisan Washington politics, since Republican lawmakers have made clear they would like to get rid of anti-foreclosure programs altogether, and would block any new programs.

For more, see For the Jobless, Little U.S. Help on Foreclosure by Andrew Martin, June 4, 2011 at NYTimes.com.