Failure of HAMP, Possibility of Do-Over?
A recent article in the Washington Post offered a fresh look at the Home Affordable modification program (HAMP). The program is not faring nearly as well as the administration had hoped it would for a variety of reasons. Among these problems: not enough banks signed up, the system is confusing or deficient, and the application requirements are too tough.
As a program that was intended to reach 3 to 4 million, the actual 200,000 who have successfully reduced their monthly payments is disappointing. The Treasury recently released a full report on the current state of the program, which our friends at the Consumer Law and Policy blog have talked about here.
To make matters worse, this program only focuses on one aspect of debt: primary mortgages. A comprehensive program to cover second loans (ie. home-equity loans) is desperately needed. With housing prices still in decline, and unemployment rising, the situation with housing loans has become desperate for many people.
Another major problem stems from lenders not having any incentives to use the program because it does not provide adequate compensation. Mortgage lenders make money on fees that occur before a foreclosure and don’t make any money renegotiating loans with a lower monthly rate. Policy makers must work on a more comprehensive solution to address these gaps… and fast.