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Is HAMP a failure?

By Marcie Geffner · Bankrate.com
Thursday, December 16, 2010
Posted: 3 pm ET

"Failure" may be too harsh a word to describe the shortcomings of the U.S. Treasury's Home Affordable Modification Program, but HAMP hasn't exactly been an unqualified success either, judging by the Executive Summary of a 192-page report issued Dec. 14 by a Congressional oversight panel.

Here are three snippets, quoting directly from the report:

• The Panel now estimates that, if current trends hold, HAMP will prevent only 700,000 to 800,000 foreclosures -- far fewer than the 3 to 4 million foreclosures that Treasury initially aimed to stop.

• Many of the problems now plauging HAMP are inherent in its design and cannot be resolved at this late date.

• Absent a drastic increase in HAMP enrollment, many billions of dollars set aside for foreclosure mitigation may well be left unused. As a result, an untold number of borrowers may go without help -- all because Treasury failed to acknowledge HAMP's shortcomings in time.

Reasonable folks may differ as to whether the U.S. government should help homeowners avoid foreclosure and whether this program was a smart idea from the start.

But setting aside those debates, HAMP clearly has fallen far short of what was promised, and many of the shortcomings were easily foreseeable from the beginning.

Among them, quoting again from the report:

• Banks typically hire loan servicers to handle the day-to-day management of a mortgage loan, and the servicer's interest may at times sharply conflict with those of lenders and borrowers.

• HAMP attempted to correct this market distortion by offering incentive payments to loan services, but that efforts appear to have fallen short, in part because servicers were not required to participate.

• Many borrowers have second mortgages from lenders who may stand to profit by blocking the modification of a first mortgage.

• Treasury has also failed to hold loan servicers accountable when they have repeatedly lost borrower paperwork or refused to perform loan modifications.

To be fair, 700,000-plus loan modifications is that many more than the zero which might have resulted without HAMP. But that's bound to small comfort for the 2 million-plus homeowners who seemingly were promised something more.

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10 Comments
tmk
January 31, 2011 at 6:57 am

I believe your success with a HAMP mod depends on your servicer. our mod went great. We applied in Apr09 & got in a trial period for 9mo. Sent paperwork in when requested & went final this in Dec10. We had a GREAT bank to work with, they helped us step by step with no problems. The HAMP has worked for us!

albert taylor
January 13, 2011 at 8:24 am

R F Denz
when i read your comment,, it follows the same path that i have been on for a year and a half.it really amazeses me that they can offer a program and no one will support it referring to the big banks that the goverment bailled out . they sure didnt hesatate in taking a helping hand when they needed it ,,, I just cant belive the way the system works or the way that man treats there fellow man in the time of need,, the world is in a mess and is going to be for a while so why not pull together and help every one get threw theses hard times ,,,,

I was reading the comment of the loan banker above {your comment }he blames the problem on greed lack of sence well i wonder where he would be if the goverment wouldnt have bailed his bank out . let me guse well out of a job selling his so called toys wondering where he was going to be living next year . I think he would be in the same boat alot of other pepole are in you would think he would be a little more interested in helping the pepole who are in a little trouble,, but i think he is just turning his nose up and thinking he is the perfect role moddle and dont think twice about cashing his $500,000 bonus check and dosent lose a minutes sleep over forclosing on his neighbors house . I just recived my loan modafacation papers yesterday really alot of modacation here... my pament is $50.00 less my morgage is bumpped up to a forty year loan and i have to pay the insurance and taxes thank you mr loan mod banker or shove it i havent decited ,,,

Jim
December 27, 2010 at 10:20 am

A lot of people lost their jobs for 6 months or more. How many of you could afford your mortgage if you lost your job for 6-12 months? 2009 was hard and this HAMP process was a failure.

Some people overextended themselves but again, who wouldn't be overextended if they went 6-12 months w/o income?

Jim

PS: I don't blame people who go for strategic defaults - corporations would do the same thing in a minute.

LA Loan Mod Banker
December 26, 2010 at 12:30 am

To begin with, I work for a bank and I oversee our foreclosure and loan modification programs. My experience over the last 3 years has shown me that approximately 95% of the mortgage loan defaults are due to greed and a lack of common sense - both by the lender, and to a greater extent, the borrower. How can you blame the lender when you sign the loan documents and take the money? The borrowers wanted what they wanted and greed blinded them to what might happen. The subsequent spending spree by most borrowers was obscene - everyone wanted to keep their toys. I foreclose on families every day who insist on keeping their RV's, boats and timeshares current, but let their home loans go. Did they really think a combined monthly income of $6000 would pay for everything? Common sense in this country is at an all time low. My heart breaks for those who have lost jobs or suffered health-related hardships. To the rest who just overspent and want to blame someone for their bad behavior I say "get out of the house and don't steal all of the fixtures and appliances on your way out the door!"

TSK
December 24, 2010 at 2:00 pm

It was the perfect storm. All the comments are correct. There were people who knowingly over leveraged their homes for toys, vacations, etc. There were greedy mortgage brokers who put people into mortgages that they could not afford after resets. The banks turned a blind eye on their qualifying requirements as they were going to just sell the loan off anyway and give someone else the problem. The rating agencies wanted the banks business so they accepted the banks packaging sub prime loans and claiming they were AAA rated. The government looked the other way because they were getting a lot of home ownership by lower income people. And they were all betting that housing prices would go up for ever and never see a downturn.

Each group had a motive of greed, reelection, power, pleasure, etc. Unfortunately there are two sets of victims. I don’t feel bad for the people who leveraged for toys, vacations, etc. Most of them understood what they were doing. But the people who were taken advantage who did not understand they could not afford the mortgage and were talked into getting into a house they could not afford, these people I have sympathy for. I also feel bad for the people who did everything right and now have to bail out everyone else. They will have to retire later to help pay for other peoples greed and mistakes. Wave one was the people who were on time bomb mortgages. Wave two I feel bad for too they are the ones who lost jobs and are losing their homes. They would not have lost their jobs if the other problems did not happen.

It is a very complicated situation. There are so many instigators and victims that it is hard to separate them out. Invariably to help victims you have to help instigators too. That is what rubs so many people the wrong way. That is also why HAMP failed as it was for victims but many were instigators who qualified for the program. It is also implemented by instigators who want to blame others. Some banks are getting away with almost no participation. No politicians are calling them on the table for lack of participation. Too many dirty hands in control! In addition many people just want a hand out and don't want to have to work hard to get out of the situation they are in. That rubs too many people the wrong way.

R.F.Denz
December 24, 2010 at 1:06 pm

I have been trying to get a HAMP modification from Ocwen LLC (Freddie Mac Holds my mortgage) for about a year. At first I figured they were swamped, then I figured they were incompetent, now, having subbmitted my 4th. complete submission, and sending copies of every thing to a Freddie analyst, I was offered a non HAMP mod to 4.5% 39 1/2 year amort.. In the meantime with dwindling reserves I get closer and closer to losing my home when a modification to them market rates would have saved it.
I am convinced that servicers, at least mine, actively push to force a foreclosure process or alternative loan because they likely make more money that way. And the Treasury being of the same tribe flounder with insufficient action. Freddie Mac seems just as helpless. If I lose my home, which seems likely, it will be because Ocwen wants it that way. It can be prevented.
RFD

Please
December 21, 2010 at 9:09 pm

More of the same... it's everyone's fault but mine mentality. It's disgusting that people who over leveraged because they borrowed against their home to the max value to get vacations, new cars, dinners, toys, boats and the list goes don't want to take responsibility for their actions. I'm sick of it!

Marcie Geffner
December 19, 2010 at 3:37 pm

Thanks for sharing your story. Certainly, not everyone who has lost their home was a victim of over-leverage or subprime lending. Many homeowners have said a loan modification wasn't enough to change the outcome of their situation, and the problem of "refaults" has also been widespread. "Thanks, HAMP," indeed.

fraud fighter
December 18, 2010 at 11:18 am

This exact story is the same for many families. The media would have you believe it was an irresponsible borrower biting off more than they could afford. Consequently, many Americans who aren't affected think the same. The core problem is greedy mortgage brokers and banks not following lending regulations, refinancing people with 750 scores into bad loans, telling them they can refinance when the rate adjusts up (when they knew this bubble was coming in 2006). They got their commission, the bank gave the loan manager huge bonuses for volume, and the bank profited and sold the loan after 30 days to make sure they were off the hook when it went bad. Once the bubble burst Americans were faced with another challenge --big job losses! Should have never happened if shady greedy banks had not made so many bad loans. If you were lied to at closing or just before closing when it was too late to back out, or you were given a loan that was 60-100% of your income or income and expenses (yes they did give loans to people that their income was = too their mortgage payment) Make no mistake people this was deliberate, they knew what they were doing. They didn't care because they already had their commission at closing. Get a competent offensive foreclosure attorney. It will cost you about 2000 upfront but it is worth it to stick it to the people who stuck it to you.

Homeless
December 17, 2010 at 11:15 am

I would like to see of those 700000 modifications, how much LOWER the borrowers payments were and how many of those are now beind on their mortgages again.

I attempted to get a modification with my bank and after SIX MONTHS (even though their written letter to me said 60 days for processing) their "modification" trial payment was only $180/month different from the initial mtg payment. Did not really help after our income was chopped in half due to my husband's job loss (he was out of work for 2 years, to finally get a job where he went from management to entry level at a rate that is about 60% less than what he previously made) and at the same time bringing our second child into the world.

If they were going to do this whole thing, they should have had a centralized processing system, where the banks did not have their hand in any of the process or decision making. Bottom line is they gave these banks taxpayer dollars and other incentives to help their clients, but their greediness had them pocketing the money for themselves and doing nothing to help borrowers. Now those same companies, that were on the verge of crumbling are reporting nice profits and people like myself are out of a home and left to file bankruptcy. This would not all feel so bad, if I was truly a "sub-prime" borrower and bought something I could not afford. When I bought my house, I had a down payment, emergency funds, retirement funds, college savings and a two income household (with one child on the way). By the time my husband lost his job and interest rates were at an attractive point to refinance, our value had dropped to where we could not refi and our new income could not carry it, so we were SOL and all that we had is gone. No house, no emergency fund, no retirement savings, no colleges savings. We did get a nice pile of debt, a repoed car and the pleasure of having to move myself, my husband and our two daughters in with my mom, from CT to GA.

Thanks HAMP!