Republicans Say Government-Led Mortgage Modifications are a Failure
Republicans sitting on the House Committee on Oversight and Government Reform are claiming today that the Obama administration's Home Affordable Modification Program (HAMP) is a bust, saying in a report to the committee that “by every empirical measure, HAMP has failed."
The US Treasury Department launched HAMP in March 2009 to allocate capped incentives to servicers for the modification of loans on the verge of foreclosure. The $75bn program aims to modify 3-to-4m mortgages by the time it expires in 2012.
Through January, participating servicers provided 116,000 permanent modifications, an increase from 66,000 in December. In November 2009, the Treasury initially estimated 375,000 permanent modifications by the end of the year.
In a report to the committee, Rep. Darrell Issa (R-Calif.) and Rep. Jim Jordan (R-Ohio) pointed to the unmet Treasury claim as a sign of an "underwhelming" program.
At the outset of the program, servicers pressured to get as many borrowers signed into three-month trial modifications as possible did so without collecting all of the necessary documents. Servicers decided to collect such info along the way instead. According to the report, this practice hurt homeowners who did not meet the program requirements as they could have been spending the trial payments on other housing options.
The Treasury shifted HAMP guidelines to exclude a borrower from the trial period without first submitting vital documents like proof of hardship and income.
The Congressmen go on to claim that the Treasury hides and obscures certain statistics in its monthly HAMP figures. They say that in each report through November 2009, the Treasury included the amount of borrowers who received requests for financial information from the participating servicer. In November, that number totaled 3.1m. When the amount permanent modifications – 31,000 in November - is taken as a percentage, that ratio comes to 1%. In the December report, the Treasury removed that statistic.
Also, the January 2010 HAMP report shows an estimated 3.4m HAMP-eligible loans in the participating servicer portfolios. A footnote shows the requirements of the program, including loans in foreclosure or bankruptcy, having an unpaid principal balance less than $729,750 on a one-unit property, owner-occupation and that the loan was originated before Jan. 1, 2009. But it excludes the requirement that the borrower be employed, potentially bolstering the number.
The Mortgage Bankers Association (MBA) submitted a forbearance plan to the Treasury for borrowers without a job.
“The Administration’s pressure, and the servicers’ redoubled efforts, have not alleviated the foreclosure crisis,” according to the report.
An inquiry to the Treasury was not immediately returned.
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