Congress Told HAMP Will Cost $53bn Less than Expected
The US Treasury Department initially planned to spend $75bn on the Home Affordable Modification Program (HAMP), but in a recent report to Congress, the Congressional Budget Office (CBO) projected the Treasury will spend a total $22bn on the program. This figure represents total expenditures from day one of HAMP until the program expires in 2012. The CBO is required to submit a report on the transactions under the Troubled Asset Relief Program (TARP) 45 days after an analysis by the Office of Management and Budget (OMB). The CBO reported the cost of present and future TARP transactions will cost $109bn. At the outset of HAMP, the Treasury planned to disburse $50bn through TARP with the remaining $25bn to come from Fannie Mae (FNM) and Freddie Mac (FRE). According to the latest TARP transaction report, the Treasury has adjusted the total cap amount to $36.9bn for HAMP servicers. The CBO reported something different. According the report, TARP will disburse no more than $20bn to servicers for permanent loan modifications. Through February, the 113 servicers provided 170,000 permanent modifications. Another $1.5bn will come from the Hardest Hit Fund for select state Housing Financial Agencies (HFAs). The HFAs of California, Arizona, Nevada, Michigan, and Florida are already planning to spend the money to help underwater borrowers reduce their principal balance. The OMB estimated the Treasury will disburse $49bn under HAMP. The difference between the CBO $22bn estimate and the OMB projection “stems primarily from disparate outlooks on the number of eligible households and the participation rate among those households.” At the outset of HAMP, the Obama Administration set a target to reach 3-to-4m homeowners. While the Treasury maintains the program is on track to reach that goal, critics of the program are already pointing out its failure, and watchdogs are taking a closer look at the rising volume of complaints. Write to Jon Prior.