One Year Down the Road, COP Says Success Still Escapes HAMP
The launch of the Making Home Affordable Modification Program (HAMP) lacked drive, and despite changes to the program to help additional distressed borrowers, the Treasury Department’s response continues to lag well behind the pace of the crisis, according to the latest Congressional Oversight Panel (COP) monthly report. It's an opinion that seems validated when considering similar initiatives spear-headed by the nation's largest servicers.
“It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble,” the COP wrote in the April Oversight Report, adding that Treasury’s stated goal of offering 3m to 4m modifications will result in only a fraction resulting in temporary modifications, and only some of those modifications will convert to final, five-year status.
“In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem,” the report continued.
The private sector has found less success in modifying mortgages through HAMP than through other in-house strategies. According to testimony by Bank of America ($13.14 -0.07%) Home Loans president Barbara Desoer to the House Financial Services Committee this week, of BofA's 14m mortgages, 1.4m are 60 or more days delinquent. All told, BofA completed 560,000 of its own modifications to those borrowers. Similar success escapes government-led initiatives as even though 391,000 borrowers at BofA were offered a HAMP mod, only 33,000 are now permanent through HAMP.
In response, Treasury said it agrees with COP’s assessment that foreclosures are at an unacceptable high rate, but defended its efforts at stemming the tide of foreclosures through HAMP and the recently launched Home Affordable Foreclosure Alternatives (HAFA) program.
“It’s critical to point out that many of the foreclosure starts that are referenced in this report will in fact never become foreclosure sales thanks to HAMP and HAFA,” Treasury said in a statement.
“As we have said before, these programs are not intended to help every homeowner in trouble. The Administration’s programs were designed to help responsible, eligible families keep their homes, not for investors or speculators, and not to save million dollar houses or vacation homes,” the statement continued. “We also must recognize that we cannot help those who simply bought a home that they could not afford.”
According to the COP report, as of February 2010, only 168,708 homeowners have received final, five-year loan modifications — a small fraction of the 6 million borrowers who are presently 60+ days delinquent on their loans. For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes, COP said.
But according to the Treasury, the March HAMP report, expected to be released Thursday, will show more than 1.4m homeowners received offers for trial modifications more than 230,000 homeowners received permanent modifications and an additional 108,000 permanent modifications have been approved by servicers and are pending only borrower acceptance. More than 1.1m borrowers are receiving a median savings of $500 each month.
Write to Austin Kilgore.
The author held no relevant investments.
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