Housing and Urban Development Secretary Shaun Donovan, seen here in February, says the government has made a significant dent in the number of homeowners falling into foreclosure.
Housing and Urban Development Secretary Shaun Donovan, seen here in February, says the government has made a significant dent in the number of homeowners falling into foreclosure. Susan Walsh/AP
The head of the Department of Housing and Urban Development says the government has made great strides in modifying loans through its Making Home Affordable program but acknowledges that more needs to be done.
The program has modified 200,000 loans since March; 1 million homeowners are in default, and up to 3 million are delinquent.
HUD Secretary Shaun Donovan calls the number a "significant achievement" but says the agency had planned to have 3 million to 4 million loans modified over three years.
"We realize that we have to get to that scale to be able to have a real impact on this problem," Donovan tells Madeleine Brand. "We are not there yet, but we have been meeting with the banks and made it very clear to them that they had to step up their efforts to get to as many homeowners as possible."
HUD has set a goal of having 500,000 modifications under way by Nov. 1.
It is not necessarily in the banks' best interest to modify loans, however. Mortgage companies may be reluctant to modify loans because they collect lucrative fees on foreclosures, the Federal Reserve Bank of Boston says.
Donovan says HUD has created incentives for banks to work with homeowners that are comparable to what the banks would get through fees.
"Ultimately, it's not the servicer that controls the fate of the loan; it's the owner of the loan," he says. "And ultimately, it's a benefit to the owners of the loans to actually get them modified."
No one thing is likely to fix the mortgage crisis, however. Although the economic meltdown began with bad mortgages, it is now being driven by unemployment. Donovan says both must be tackled.
"We're going to have to attack unemployment ... while at the same time we're attacking the problem with the mortgages," he says.