Yes. The facts of the program’s success speak for themselves.
The Home Affordable Modification Program (HAMP) provides much needed assistance to struggling homeowners in an unprecedented housing crisis. HAMP establishes important standards that have led to sustainable options for homeowners to avoid foreclosure, while protecting taxpayer interests.
Still, despite these successes, some have called for terminating HAMP prior to its December 2012 scheduled end date because it hasn’t helped more individuals.
Here are the facts: To date [as of early September], over 800,000 families have received a permanent modification through the program, reducing their mortgage obligations by over $7.8 billion. Tens of thousands of additional families enter the program each month. The standards that HAMP put into place on homeowner outreach, payment affordability, and borrower protections have helped reform an industry that was not equipped to deal with this crisis. That in turn has led to two million more modifications at no expense to taxpayers.
Data also show that after 12 months, the re-default rate on HAMP modifications is much lower than other modifications completed during the crisis. HAMP was prudently designed to help only those homeowners struggling with a financial hardship who would be able to afford their home with some assistance. HAMP does not assist with investment properties, vacant homes, or jumbo loans, nor does it help those whose mortgage is already affordable without assistance. HAMP uses a “pay-for-success” model to protect taxpayer interests. Money is spent only after a modification becomes permanent and is paid over five years only if a homeowner continues making payments.
While we haven’t helped as many people as we would like and not every foreclosure can be prevented, that’s no reason to stop helping those we can. We will stay the course to keep pressure on mortgage servicers to reach more eligible homeowners.
No. There is no justification for continuing to pay servicers to perform loss mitigation duties.
I learned in business that you need to recognize two moments in the time line of an investment: when to take a profit on a winner, and when to move on from a loser.
The Home Affordable Modification Program falls into the latter camp. HAMP has achieved one humble success: It forced mortgage servicers to develop industry-wide best practices. But there is no justification for continuing to pay servicers to perform loss mitigation duties.
The most egregious aspect of HAMP—having the taxpayer pay lenders and borrowers for modifications—needs to end immediately and will return roughly $30 billion to the general Treasury coffers for deficit reduction. With only 657,000 homeowners in permanent modifications [as of August], HAMP has failed to achieve even a quarter of its promised goals.
It appears that Treasury designed this program with input from just a few mega-servicers. Other voices—including small servicers, community banks, distressed asset managers, and mortgage investors—were excluded. We leave mortgage investors out of housing finance conversations at our peril.
If we continue down this path, mortgage investors might not finance American mortgages in the future. This would cause interest rates to skyrocket and homes prices to fall further. Private mortgage investors are the key to housing finance reform, and we must earn back their trust. We should start by dismantling the failed HAMP program.
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