US's Home Affordable Modification Plan Has 25% Success Rate
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US's Home Affordable Modification Plan Has 25% Success Rate

Many people are calling HAMP an unsuccessful flop and a waste of money. Was it a success? And if not, what more can be done to help those homeowners who are having problems making their mortgage payments?

If you’re like the overwhelming majority of people who tried to participate in the government’s Home Affordable Modification Program, you didn’t get the help you were seeking. Only 25 percent of those who sought financial help with their mortgages received some form of assistance under a program that was heralded as one that will almost solve the housing crisis. More than 2.5 million homeowners tried to get assistance so they could stay in their homes, but only 1 in 4 of those actually received that help. So what happened?

One of the reasons so few people received help was because they did not qualify. That’s understandable in some respects. Unfortunately, thousands of homeowners were disqualified from participating in the program after they were initially accepted into it. They got their hopes up and then they were dashed several months later only to find out in many cases that they had to pay the back payments on their mortgage or else face foreclosure.

The original idea of HAMP was to lower interest rates and lengthen the term of the mortgage loan for homeowners who were not able to make their payments. This was supposed to cut down on the number of foreclosures occurring throughout the country. As a result, the taxpayers would have a smaller bill to pay. Currently, the government has only spent $1 billion out of the $75 billion allotted for the program.

The program is not without its faults and problems, either. According to Neil Barofsky, the current overseer of the program, the guidelines were unclear for qualifying for the program. As a result, there was a great deal of confusion which caused major delays in helping people and implementing the program as effectively as many had hoped. He went on to say that HAMP “continues to fall short of any meaningful standard of success.”

Others are criticizing the program, too. Republicans in the house have said that HAMP is a waste of money and they are trying to come up with proposals and programs that will be more helpful for troubled homeowners.

Currently, HAMP is designed in a way that encourages mortgage servicers to modify mortgages for people who are having problems making their payments. If a homeowner is accepted into the loan modification program, they have a three-month trial period in which they must make their payments on time and in full before they are placed permanently into the program. But 1.3 of those homeowners were rejected before even entering into the trial period. The majority of those who were rejected were disqualified because they didn’t submit the appropriate paperwork. Others were denied because their mortgages were deemed “affordable” based on their pre-tax income.

Regardless of how you look at it, HAMP has helped hundreds of thousands of troubled homeowners. And while there are still hundreds of thousands of them looking for help, I’m sure the ones that it has helped are extremely grateful for the program. Let’s hope it can just stretch further and help even more people or let’s hope another system is instituted that can help those who need it.

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Comments

  • Jeff Miller

    May 03, 2012

    "I’m sure the ones that it has helped are extremely grateful for the program." Really? Most of the "successful" modifications are forebearances that tack a few months of payments onto the back end of the loan, increasing the total debt, and increasing payments when they are resumed. The fact is, your "lender" probably only services your loan but doesn't own it. It's fees a primarily based on the amount of your debt, but it also picks up revenue for late payments, working on modifications, and processing foreclosures. They have a "dual track" mandate to pursue modifications and foreclosures at the same time, and since foreclosures are quicker, you can actually be foreclosed upon despite being approved for a not-yet-implemented modification. Meanwhile, in your attempt to get a modification, you got behind in your mortgage payment, which made you ineligible for a refinance which would have been more likely to succeed. Happily for your lender-servicer, that secured their servicing revenue for at least another year, revenue they would have lost had you refinanced before getting behind on your payments. It's a scam that in the vast majority of cases serves only to enhance the profitability of the big bank loan servicers.

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