TARP Watchdog Questions if HAMP Results are Worth the Cost
The watchdog of the federal bailout efforts criticized efforts under the Home Affordable Modification Program (HAMP), saying the number of borrowers receiving modifications remains "anemic." Special Inspector General for the Troubled Asset Relief Program (SIGTARP), in its quarterly report (download here), noted fewer than 400,000 permanent modifications through HAMP so far. As of June 30, a total 753,275 mortgages were being modified, either permanently or on trial basis. "Treasury's refusal to provide meaningful goals for this important program is a fundamental failure of transparency and accountability that makes it far more difficult for the American people and their representatives in Congress to assess whether the program's benefits are worth its very substantial cost," SIGTARP said in the report this week. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. In order to receive a permanent modification through the program, borrowers must make three monthly payments during the trial period and submit all documentation. In exchange for participation in the program, the Treasury distributes TARP funds as incentives. So far, SIGTARP found, the program has paid out $247.37m in incentives through the first-lien modification program and $149,3000 in incentives for the Home Affordable Foreclosure Alternatives (HAFA) program: The TARP watchdog noted that, despite participation in HAMP, the program failed to "put an appreciable dent" in foreclosure filings so far. "Indeed, the number of trial and permanent modifications that have been canceled substantially exceeds the number of homeowners helped through permanent modifications," SIGTARP said. According to the June HAMP report, servicers converted 51,205 trial modifications into permanent status with 8,823 permanent modifications canceled, including 195 mortgages that borrowers paid off. Cancellations continue to rise as servicers comply with Treasury guidance to make decisions on aged trials. Of the cancellations in June, 60% had been in trial modifications for six months or longer. SIGTARP once again in its quarterly report criticized the Treasury for failing to publicly announce goals or performance benchmarks of borrowers to be permanently helped. In the April report, SIGTARP recommended Treasury identify participation goals and expected costs for each HAMP program and subprogram, as well as launch a fraud awareness campaign and include warnings with each new program announcement. Since then, SIGTARP noted, Treasury failed to clarify an expected number of permanent modifications. Write to Diana Golobay.