When last we visited the Home Affordable Modification Program (HAMP) — which is the Obama administration’s signature foreclosure prevention program — it was badly sputtering, spending little of the money allocated to it. More borrowers were being booted from the program mid-stream than were receiving permanent mortgage modifications.
The Congressional Oversight Panel released a report today that doesn’t make the picture any prettier. To date, HAMP has processed about 500,000 permanent loan modifications, out of 1.4 million trial modifications that have been initiated. And the redefault rate (meaning the number of borrowers who again fall behind on their mortgages, post-modification) is an ugly 21 percent:
Figure 19 shows that although only around 1 percent of permanent modifications are 90+ days delinquent within their first three months, the number jumps to 5.5 percent by month six and 11 percent by month nine; within a year, 21 percent of HAMP permanent modifications are 90 or more days delinquent, at which point they are disqualified from the program.
As Naked Capitalism’s Yves Smith noted, “HAMP should have done much better by virtue of putting borrowers through a trial mod, plus offering deeper payment reductions than typical private mods. How much better is an open question, but a 21% first year redefault rate says the program will fall far short of Treasury’s goal that the program would show only 40% defaults over the five year ‘permanent’ mod time frame.” Indeed, by just about any measure, HAMP has underwhelmed.
At this point, the Congressional Budget Office estimates that just $12 billion of the $50 billion dedicated to foreclosure prevention will be spent, which brought Mike Konczal to note that some members of Congress explicitly voted to release the second tranche of TARP funds because it included help for homeowners that has yet to materialize:
In exchange for getting the second half of TARP, the Obama administration promised publicly to dedicate at least $50 billion for foreclosure relief and to push for mortgage modification…People took votes, politically difficult and unpopular votes, because of these promises, and they have failed to be delivered.
HAMP has suffered from a nasty confluence of bank intransigence, design trouble, and lack of concern over its poor performance. While Congress and the administration grapple with just how big a tax cut to give to the richest estates in the country, a few moments dedicated toward fixing this fundamentally flawed program are certainly in order. Here are a few suggestions.