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Failure of HAMP, Possibility of Do-Over?

February 19, 2010

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 compensationMortgage 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.

  1. Patricia Bowen permalink
    February 20, 2010 1:45 pm

    My husband and I have recently been approved – by our subprime lender – for the HAMP. I am questioning their tactics, however. When I told them I thought they were to reduce the payment to 31% of income – they said – “no – if payment is already at 31% or less one does not qualify as government assumes you can pay that amount with a modification.” In addition, they are adding all back taxes, all delinquency, and all past interest to the back of our loan, if we make it through the trial period. The first payment is due one month from when we received our packet Thursday, then the next are on the first of May and June. The payment is lower and includes tax and insurance escrows which this lender did not previously do. We filed bankruptcy last year and were not able to reaffirm this and the equity line of credit on our home as we hired a bad law firm who did not get the papers to the lender in time to file. Upon re-opening the file – a judge looked at it and denied it. I am thankful we have been approved for the HAMP, however, we will now owe so much more than the property is worth, we will never catch up – we do get to stay in our home and hold on to our 2 acres, but wish they would have at least written off arrears and/or devalued the mortgage to actual value of home. Would appreciate any feedback on this. I may be all wrong – should read the bill I suppose. However, dont’ think this is what the President had in mind. Also, if the law is changed, can we reapply? And, if our lender is not being fair to us, is there any other recourse?

  2. Patricia Bowen permalink
    February 20, 2010 1:46 pm

    Oops – meant to say in 2nd sentence regarding the 1% – “without modification” – not with as written.

  3. jeff permalink
    April 9, 2010 9:30 am

    HAMP isn’t even being considered by Capital One, NA.
    They have no interest in the most recent voluntary “FHA tweaks” either.

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