“The reasons for the failure of HAMP are complex,” Issa wrote in a letter to the Oversight Committee’s ranking member, Rep. Elijah Cummings (D-MD). “I share your view that strong oversight is needed in order to help American homeowners and reduce the waste of taxpayer money.”
On the list of programs desperately in need of some accountability, HAMP has to be high on the list. It was supposed to help 3-4 million troubled borrowers stay in their homes, but is on pace to fall woefully short of its goals, while just a fraction of the money allocated to the program will be spent. More borrowers enroll in the program and then get dropped (after making a series of payments) than ultimately receive sustainable mortgage modifications.
But if Issa does launch a HAMP investigation, what is his ultimate aim? Back in March, Issa wrote that “the Obama administration needs to focus on helping families find ways to weather troubled times and stay in homes they can afford instead of finding ways to mask [HAMP’s] failure,” which sounds moderately encouraging. However, in July, he advocated ending HAMP entirely, and leaving troubled homeowners to try and obtain substantively worse private loan modifications:
“It defies common sense that taxpayer money is being used to pay banks to modify loans that are likely to default anyway,” said Rep. Darrell Issa (Calif.), the ranking Republican on the House Committee on Oversight and Government Reform. “In cases where loan changes could keep borrowers out of foreclosure, banks have a clear incentive to make changes without a need for public funds”…Issa and [Rep. Jim] Jordan (R-OH) argued that homeowners and taxpayers would be better off in private modification programs.
As Tim Fernholz pointed out, private modifications “don’t usually lower monthly payments enough to keep borrowers in their homes. Even the best industry modifications [only] attempt to make mortgage payments 38 percent of monthly income.” Diane Thompson, a lawyer with the National Consumer Law Center, said that homeowners would be worse off 90 percent of the time if they were all forced into private modifications instead of public.
Meanwhile, solutions exist for turning HAMP into a more streamlined, effective program, that will actually keep borrowers in their homes, preventing all of the negative effects that a foreclosure has on the individual borrower and the community at-large. HAMP is not a program that should be abandoned, but one that needs to be reformed so that it achieves its stated goals. But Issa seems more inclined to use his HAMP investigation — and others inquiries into the causes of the financial crisis — to shill for the banking industry.