The Home Affordable Modification Program (HAMP) — which is theoretically the Obama administration’s signature foreclosure prevention program — has been sputtering along, with far more enrollees being dropped from the program than receiving a permanent mortgage modification. In July, the numbers got truly ugly, with fewer than 17,000 trial modifications getting underway and more than 100,000 borrowers being bumped from the program. In all, nearly half of the borrowers who began the program, about 1.3 million, have not received a permanent modification.
The Huffington Post’s Shahien Nasiripour has a nice chart detailing the carnage. The blue line is canceled modifications, while orange is newly started trial modifications. Under the program, orange should turn to red after the borrower has successfully made three months of payments:
“The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Economy, who predicts that the program will ultimately help only 500,000 homeowners. Currently, “one in seven mortgages is delinquent or in foreclosure.”
Treasury is aware that the program is producing such lackluster results and has initiated some new, small programs targeted at the states hit hardest by the foreclosure and unemployment crises. But as Mike Konczal reported, Treasury officials are also “sticking by HAMP“:
The narrative seemed to change from helping homeowners to spacing out the foreclosures. I asked them to repeat it, because the idea that billions of taxpayer dollars are being spent to smooth out foreclosures for banks struck me as new narrative – it’s explicitly extend-and-pretend, and also fairly cynical.
Steve Waldman at Interfluidity added, “officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least.” The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) issued a report criticizing HAMP as a program “that merely kicks the proverbial foreclosure can down the road,” and it seems like Treasury is confirming that it knew this would happen all along.
According to analysts at Morgan Stanley, “without more intervention, the housing market will continue its ‘slow motion’ adjustment that will continue to inhibit economic growth and drag down consumer spending.” The lack of urgency when it comes to finding a solution for this very real problem affecting people all over the country is incredibly discouraging.