Treasury defends HAMP before House subcommittee
A Treasury Department official defended the underperforming Home Affordable Modification Program before a House subcommittee Thursday, pointing out that struggling borrowers were better off with it than without.
"Without HAMP, homeowners would have far fewer ways of coping with the worst housing crisis in generations," said Darius Kingsley, deputy chief of the homeownership preservation office at the Treasury. "Instead, their fate would be left solely in the hands of the same mortgage servicers whose standards are widely recognized to be in need of reform."
Indeed, HAMP modifications outperform private modifications by a wide margin. But its implementation, however reformed through single point of contact rules and shorter timelines, continues to frustrate homeowners and policymakers searching for a way out of the foreclosure crisis.
Since it launched in March 2009, participating servicers have offered 1.6 million trials and made 816,000 of them permanent, far short of early expectations. The number of borrowers possibly reached by the program continues to shrink, dropping below 1 million for the first time in August.
Many agree the program was rushed into implementation at the height of the foreclosure crisis. Servicers pushed borrowers into three-month trials without collecting the necessary documentation. As a result, hundreds of thousands of borrowers circled between FAX machines and outreach centers for as long as nine months in some instances waiting to hear on a final outcome.
Kingsley admitted the difficulties in his testimony Thursday, but highlighted the program changes since. The Treasury forced servicers to collect all documents before starting a trial and clawed back some payments from the largest servicers found to be underperforming, thought those funds could still be returned if the servicers improve.
Kingsley also said an array of other programs were built to help homeowners who otherwise wouldn't qualify for HAMP. But the numbers for those programs remain stunted as well.
The Home Affordable Foreclosure Alternatives program, or HAFA, for instance, resulted in less than 16,000 completed short sales and deeds-in-lieu of foreclosure since it launched in April 2010. Just 10,500 permanent modifications received a principal writedown through the Principal Reduction Alternative that began in January.
And less than 14,000 borrowers received an extended forbearance on their loan through the Unemployment Program, or UP, which began last year.
Still, Kingsley said HAMP and its subsidiary initiatives provided homeowners with more programs than ever before and the servicing industry with key benchmarks and transparency its always lacked.
"Consider that during the fourth quarter of 2008, close to 50% of mortgage modifications either kept payments the same or increased them. Today, close to 90% of modifications reduce payments," Kingsley said. "The standards that HAMP put into place have helped yield more sustainable assistance for struggling homeowners across the industry."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
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