Programs fall short of helping homeowners

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.

As a result, there is a mismatch between the homeowner program's design and the country's economic realities -- and a new round of finger-pointing about how best to fix it.

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.

Data released last week suggest that the administration's task is growing more difficult. New job growth in May was anemic, and unemployment inched up to 9.1 percent, the Labor Department reported Friday.

Earlier in the week, a widely watched index found that housing prices had fallen to their lowest level in a decade. And while the rate of homes falling into foreclosure has slowed, the reason is delays in processing foreclosures, not a housing recovery, according to RealtyTrac, a firm that tracks foreclosures. There were 219,258 foreclosure filings in April, the latest month available.

Critics of the Obama Administration's approach to preventing foreclosures have pressed for two years to get officials to focus more of their attention on unemployed homeowners, with meager results.

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.

Former Federal Reserve economist Morris A. Davis estimates that about a million homeowners fell into foreclosure because of insufficient help for the unemployed.

Administration officials said their programs have had a positive impact, albeit not as large as they had hoped.

They also say programs to curb foreclosure are voluntary, so they are limited in how far they can push mortgage servicers and investors.