Half of all loan modifications delinquent again within year

From CNNMoney.com:

It’s looking like homeowners who received loan modifications last year are already falling behind according to a federal report released Wednesday. I think this is an absolute tragedy—this economy continues to wreak havoc on the lives of many! Here’s what the article had to say:

Modifications made under President Obama's foreclosure prevention program, known as HAMP, had lower re-default rates than non-government modifications. Some 7.7% of HAMP modifications were delinquent after three months, compared with 11.3% of all modifications.

Is this an all-across-the-board problem or were there some loan modifications that fared better? HAMP had lower default rates than other non-government modifications. Under the HAMP program borrows receive incentives for making timely mortgage payments and they have their monthly payments reduced to no more than 31% of their pre-tax income.

Many experts say that servicers must do more principal reduction if they want to halt the foreclosure tidal wave. Homeowners are more likely to walk away if they owe much more than the home is worth, a situation about 1 in 4 borrowers find themselves in.

What are your thoughts on loan modifications or government programs like HAMP? Do you agree with borrowers getting incentives for paying their mortgages on time?

White House To Unveil Loans To Bring Broadband To Rural Areas

According to Nasdaq.com, the White House announced a new plan to issues $182 million in grants and loans to bring broadband access to rural areas across the country. The Obama administration claims the move will expand education and communication across the county, as well as create thousands of jobs. Over the next two and a half months the White House is expected to award over $2 billion in broadband awards.

The loans, part of a broader $7.2 billion Recovery Act program, are designed to create jobs and spur economic development, the White House's top economic priority. Vice President Joe Biden will announce the first investments later Thursday at Impulse Manufacturing in Dawsonville, Georgia, a community that will benefit from the program.

The initial $182 million in funds will go toward 18 broadband projects in 17 states, and has been matched by more than $46 million in private capital. Administration officials declined to break down which states or companies would receive the initial funds, saying details would be available later Thursday.

Jared Bernstein, Biden's top economic adviser, said the initiative would " support tens of thousands" of jobs, initially for specialists connecting the networks and workers building towers and other infrastructure. Eventually, he said, jobs would be created indirectly as the new technology allows companies to expand and communities to attract new businesses.

"When you get right down to it, this is about jobs," Bernstein said. However, he said he couldn't provide any precise forecasts on the initiative's job- creating potential.

Pay Rule Led Chrysler to Spurn Loan, Agency Says

According to a Federal watchdog agency, Chrysler supposedly turned down government loans in order to avoid executive pay restrictions that would have been enforced by the government. Check out the following article on the topic courtesy of the Washington Post.

Top officials at Chrysler Financial turned away a government loan because executives didn't want to abide by new federal limits on pay, according to new findings by a federal watchdog agency.

The government had offered a $750 million loan earlier this month as part of its efforts to prop up the ailing auto industry, including Chrysler, which is racing to avoid bankruptcy. Chrysler Financial is a major lender to Chrysler dealerships and customers.

In forgoing the loan, Chrysler Financial opted to use more expensive financing from private banks, adding to the burden on the already fragile automaker and its financing company.

Chrysler Financial officials denied in a statement that the company's executives had refused to accept new limits on their pay, adding that the firm turned down the loan because it no longer needed it. But their account conflicts with a report set to be released today by the Treasury's special inspector general for the federal bailout, saying the executives' refusal led Treasury to withdraw the loan offer.

"It was certainly a deal-breaker from Treasury's perspective," said Neil M. Barofsky, the special inspector general, who spoke to the bailout program's chief compliance officer about the situation last week.

The incident is the latest controversy to illustrate the hazards confronting the Obama administration as it sets out to assist private firms.

The uproar over the federal financial rescue, much of it focused on executive pay at bailed-out firms, has made companies skittish about taking government aid. Several big banks, such as J.P. Morgan Chase and Goldman Sachs, have said the bailout money now carries a stigma and have taken steps to pay it back. A program to aid small-business lenders has been stymied by the firms' reluctance to accept pay limits and other requirements of bailout loans.

Government officials have said that unless financial firms have enough resources to lend liberally to consumers, the economy cannot be revived.

The Treasury Department previously lent Chrysler Financial $1.5 billion, when less stringent requirements on executive compensation were in place for recipients of federal bailout money. But since that first loan was announced on Jan. 16, the Obama administration and Congress have toughened the rules.

During March, when it seemed that the first loan would run out, the Obama administration began working on a deal to lend the company an additional $750 million.

It did not take long for most of the agreement to fall in place. But on April 7, the Treasury asked Chrysler Financial to have its top 25 executives sign waivers regarding their compensation, according to the special inspector general's report.

Those waivers would have barred the executives from suing the Treasury or Chrysler Financial over new pay restrictions. As part of the economic stimulus package, Congress approved compensation limits, and the Treasury is working on clarifying what the firms must do to comply with the rules.