Refinancing programs omit many borrowers

The Boston Globe reports:

Eight states including Massachusetts have pledged almost $900 million this year to help borrowers replace unaffordable mortgages, but the states collectively have refinanced fewer than 100 people, a Globe survey found.

In Massachusetts, where the Patrick administration introduced a $250 million program in July as a "big piece" of its efforts to limit foreclosures, not a single loan has been refinanced.

In Maryland, the first state to create a refinancing program, officials have found it so ineffective that they are considering shutting it down. The program has made just nine loans in about a year.

A leading advocacy group said the programs simply aren't able to help most borrowers. "They're very well intentioned," said David Berenbaum of the National Community Reinvestment Coalition, "but these new products aren't fitting the needs of the consumers we see."

The vast majority of the applicants aren't eligible for refinancing. They have either fallen too far behind on their payments, have badly damaged credit, or simply owe more on their loans than the value of their homes, making refinancing effectively impossible.

Government can't help the problem of people who shouldn't have been homeowners in the first place.