(Read more: Mortgage alert: Borrowers change how they cheat)

“It is estimated that the improvement in recovery rates alone is worth more than $5 billion to the MMIF—which would far exceed the amount of the mandatory appropriation,” wrote Galante.

The FHA, which insures low down-payment loans, or loans with a minimum 3.5 percent down, stepped in to save the housing market. It went from about a 3 percent share of the market to almost a third of the mortgage market during the crash. But now, it’s paying the price.

“Over the years, the FHA has strayed far from its original mission. It has become the nation’s largest subprime lender,” wrote Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee.

(Read more: Map: Tracking the recovery)

Most of the FHA losses, around $70 billion, were from loans originated between 2007 and 2009. The biggest trouble has been in reverse-mortgages for senior citizens and seller-funded down payments; the latter was banned in 2008.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/101068629

The US Treasury just released its latest “scorecard” on the state of the government’s housing bailout. The numbers are still weak, compared to the overall picture.

In May, 32,398 borrowers got permanent modifications, bringing the total to 731,451, but nearly 98,000 modifications have already gone bad and been canceled. Treasury did put out some interesting new numbers on how many modifications involve principal forgiveness from the banks.

Close to 5,000 “active modifications” have a reduced principal balance of, on average, about $70,000, or 32 percent of the balance. About 16,000 more are in the trial period—kind of a pittance, when you look at the 1.6 million trial modifications started.

Banks tell me they are doing more principal reduction in their own proprietary modifications, but getting that data is, suffice it to say, difficult to obtain.

It is interesting to note that short sales are really ramping up. The Treasury’s report now includes numbers on the Home Affordable Foreclosure Alternative program, which gives incentives to servicers and borrowers to do short sales and deeds in lieu of foreclosure. Close to 18,000 of these started, nearly all short sales, and this program is just a few months old.

So, where do we stand?

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Article source: http://www.cnbc.com/id/43609086?__source=RSS*blog*&par=RSS

Today the Obama administration released its monthly “scorecard” for the Making Home Affordable Program (MHA), a.k.a. the federal mortgage bailout. The Home Affordable Modification Program (HAMP), which is part of MHA, continues to add trial modifications at about 29,000 per month and permanent modifications, a bit less, at 26,000. The redefault rate on the permanent modifications is now at 12 percent.

This month the administration released the first numbers on its Home Affordable Foreclosure Alternative program (HAFA), which pays borrowers $3000 to vacate their homes through short sales (where the bank agrees to let the home be sold for less than the value of the mortgage) and deeds in lieu of foreclosure (essentially giving the keys back to the bank). Banks get monetary incentives as well for that. So far 4500 borrowers have vacated their homes under this program.

It should be noted that in the past two weeks members of the House of Representatives voted to abolish the government’s mortgage bailout, including the HAMP and HAFA programs. It’s interesting that in light of that, the usually optimistic administration put forth this statement:

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Today House Republicans will take up arms against a sea of government housing bailouts, voting to abolish the Federal Housing Authority’s (FHA) $14B Short Refi program and the $1B Emergency Mortgage Relief Program. Next week they will take up the $29B Home Affordable Modification Program (HAMP) and the $7B Neighborhood Stabilization Program.

The argument is that none of these programs are working and that they are a waste of taxpayer dollars. The mortgage modification program, a particular thorn: “Not only is this a failing program, it’s a failing program that causes real financial pain to the very people it was set up to help,” writes Rep. Patrick McHenry (R-NC), Chairman of the Oversight Subcommittee on TARP, in a press release.

Administration officials have tried to defend the programs, admitting they haven’t performed as expected, but urging that they be given a longer life. “These programs are continuing to help people, and we don’t see that the critics are offering any alternatives,” said Tim Massad, Acting Asst. Treasury Secretary for Financial Security, on a conference call yesterday.

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Article source: http://www.cnbc.com/id/41889784?__source=RSS*blog*&par=RSS

The Obama Administration is vigorously defending its mortgage bailout programs, from the Home Affordable Modification Program (HAMP) to the Neighborhood Stabilization Program to the FHA Short Refi.

They’ve taken to the blogosphere, the reporter conference call and to a hearing room in the House of Representatives, where Republicans are bent on scrapping it all.

Interestingly, the Administration also released the “Monthly Scorecard” for the programs today. The HAMP in particular offered some pretty lackluster results. While totals continue to rise, the number of trial and permanent modifications made in January were fewer than the number made in December. New volume has been falling steadily.

Neil Barofsky, the Special Inspector General for the TARP, opened today’s hearing with strong criticism of the Treasury’s transparency, or lack thereof, in reporting the number of borrowers who can be helped. He called it “disturbing,” “shameful,” and “inexplicable.”

When the vote to abolish these programs was announced last week, and Administration spokesperson blasted, “If enacted, this legislation would close the door to struggling homeowners seeking relief in the face of the worst housing crisis in generations.”

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