The Treasury Department released a report today that appears to indicate the the Home Affordable Mortgage Program (HAMP) is becoming increasingly ineffective at modifying mortgages, its raison d’etre. The $75 billion HAMP was designed to allow distressed home owners to reduce their monthly mortgage payments in an effort to keep people in their homes. The results are underwhelming.
The number of borrowers who have dropped out of the program is increasing and is close to the number of people who received permanent modification. Almost 300,000 borrowers received permanent mortgage modifications. 277,000 fell out of the program during the trial modification period. Currently there are about 640,000 borrowers in the trial modification stage. 1.2 million home owners have enrolled in the program since it was introduced in March 2009.
Many people enrolled in HAMP complain of long delays in the modification process. Borrowers say that HAMP is hampered (zing!) by massive layers of bureaucracy, red tape, and paperwork. While this shouldn’t be surprising given that HAMP is a government program, it can be frustrating and causes at least some borrowers to drop out of the program.
HAMP has been plagued with troubles from the get-go. One of the biggest problems was that many participating banks were allowing borrowers to enroll in the program without proof of income. This caused clogs in the modification pipeline when these borrowers were forced to prove their income later. Lenders who required proof of income up front have had vastly higher levels of permanent modification than those that didn’t.
It is apparent that HAMP is not working, and it has not been working for some time. The Obama administration has actually solicited public input on the best ways to fix the problems facing housing.
What do you think is the best way to fix the foreclosure crisis in this country? Let us know in the comments section below.
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ERIC WIMMER
September 22, 2010 @ 3:00 pm
I think there should be something called the “Trade Down Program” where a home owner would move into a home that better fits their financial situation. This home would have been vacated by someone in the same situation but in a lower income bracket. This would occupy homes with the possible exception of the house at the top. The party at the bottom would be forclosed upon. This is essentually the same thing that happens already via a much more difficult process. If banks would implement a program such as this, a homeowner would simply take over another loan and move in with the permission of the bank-done. If they fail again, they can move again. This would also speed up the process and therefore people would not get so far behind- a savings for the banks, investors.
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ERIC WIMMER
September 22, 2010 @ 3:09 pm
One other idea- If the federal Reserve were to lower their rates into negative catagory (for example minus .5%) they would in fact be actually be paying a person or entity to borrow money. This would be financed with government funds which have been set aside (and much of it un-used) to help people in need with various debt. Better yet, make it unavailable to banks.
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Israel Towers
November 17, 2010 @ 2:22 pm
The biggest fraud out in the mortgage modification industry is not being done by scammers trying to make money on helpless foreclosed victims. The biggest scam of all is that banks are trying to get more money on their mortgages and as a result are offering people trial modifications that never become permanent. This ploy is done so that they don’t flood the market with foreclosed homes, get more money on those unpaid mortgages and are stringing along unsuspected homeowners until the right time comes along and they can pull the string. This is being done at the highest levels and is systematically targeting unsuspected homeowners. We need class actions lawsuits that will expose these fraudulent activities and bring these bank owners and executives to justice.
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