The Home Affordable Modification Program (HAMP) may be subject to its own “trustee sale” as Financial Services Committee Chairman Spencer Bachus recently announced bills that would terminate the often ineffective housing foreclosure programs that include HAMP. In this time of budget slashing and cost cutting these programs would slice a total of $45 billion.
Maybe it isn’t such a big blow to homeowners because as we’ve reported in the past that despite all of the hoopla, only about 10-12 percent of homeowners have received permanent loan mods. And only some of those have been through HAMP or related programs.
When we look at the numbers, we see that only about $840 million of the $29 billion set aside for HAMP has been spent. Originally, the Treasury tossed out numbers in the range of 4 million homeowners who were supposed to be helped. Instead, those numbers sit at a disappointing 521,630 permanent loans modifications. Even worse, although we don’t have exact numbers, is that the re-default rate remains disappointingly high.
The loan mods that did occur often left homeowners with higher payments, lower equity and lower credit scores. Oftentimes, the loan mod represented a “lost leader” to the homeowner while benefiting the bank coffers.
If the Feds pull the plug on the HAMP and other government backed loan mod programs then homeowners will be left with the servicers’ in-house programs which, depending on the bank, can range from adequate to insulting.