From the U.S. Government Accountability Office, www.gao.gov Transcript for: Federal Efforts to Help Homeowners Keep Their Homes Description: Audio interview by GAO staff with Mathew Scire, Director, Financial Markets and Community Investment Related GAO Work: GAO-12-296: Foreclosure Mitigation: Agencies Could Improve Effectiveness of Federal Efforts with Additional Data Collection and Analysis Released: June 2012 [Background Music] [Narrator:] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's June, 2012. In an attempt to help struggling homeowners keep their homes, millions of home loans have been modified through federal and non-federal efforts. Yet the number of loans in foreclosure remains historically high and the U.S. housing market remains weak. A group led by Mathew Scire, a Director in GAO's Financial Markets and Community Investment team, recently reviewed issues around the response to the housing crisis. GAO's Jeremy Cluchey sat down with Mathew to learn about what they found. [ Jeremy Cluchey: ] Can you start by talking about the different federal loan modification and refinancing efforts that are currently underway? [ Mathew Scire: ] Yeah sure. So a lot of folks probably have heard about Treasury's effort which is called the Home Affordable Modification Program, or HAMP and so that's I would say the largest of the federal efforts or federally-sponsored efforts. You also have efforts underway at the government sponsored enterprises, Fannie Mae and Freddie Mac, as well as at the Federal Housing Administration, the Veteran's Administration, and USDA has a small program as well. So let me start with the Home Affordable Modification Program. That was announced a few years back and there has been up till now, almost a million borrowers who have received home modifications, or permanent home modifications through that program. And what it tries to do is to reduce the payment or for borrowers, mortgages to an affordable level and in this case, that's down to 31 percent of their gross income. The other programs may not necessarily solve for affordability, but might offer other features in terms of modifying the loan. FHA, for example, focuses a lot on repayment and coming up with repayment plans. They may not necessarily reduce the monthly mortgage payment like the HAMP program does. [ Jeremy Cluchey: ] You mentioned that about 1 million homeowners have had loan modifications through HAMP. Can you talk about how many other homeowners have received relief through these various efforts? [ Mathew Scire: ] Yeah sure. So in total, there's been close to 2 million homeowners who have received some form of relieve through the federally-sponsored efforts. Now loan servicers can do loan modifications outside of these programs, and they have. So in addition to the more or less 2 million federally-sponsored modifications, there's been about the same number that the servicers have done on their own. [ Jeremy Cluchey: ] Your team also looked at the state of the housing market generally. What did you find there? [ Mathew Scire: ] Well there are still problems with the housing market so 8 percent of all mortgages were either in default, meaning that the borrower is 90 days late on their payment or more, or the house was in foreclosure. So that's a significant number of defaults and foreclosures and in fact, that's still near all time highs. House prices have declined by over 32 percent from their peak and they seemed to be skipping along the bottom here. Mortgage debt now is at a level that it exceeds home equity by almost $4 trillion and so that gives you a sense of sort of the dimensions of stress that's being felt by homeowners right now. So we also did some work to estimate the number of borrowers who are at risk of foreclosure going forward and this is based upon data from last year. And what we found was that between 1.9 and 3 million homeowners are at risk of foreclosure going forward. [ Jeremy Cluchey: ] And what steps is GAO recommending be taken to improve the effectiveness of these efforts? [ Mathew Scire: ] Well one of the key things we think can be done, particularly with the FHA and VA and USDA efforts, is for those agencies to take a closer look at the structure of their programs and in particular, looking at the data that they have and to collect data that you don't currently have to understand whether or not their programs are designed to optimize the reperformance of these loans. There are some loan modification actions which are more effective than others, and it also depends in part on the condition that the loan is in and the borrower's situation. So we think that there's more analysis that could go into and provide support and rationale for the policies that are currently in place there. [ Background Music ] [Narrator:] To learn more, visit gao.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional watchdog, the U.S. Government Accountability Office.