St Louis Mortgage and Real Estate News –
St Louis Finance and Mortgage Refinancing News: HAMP Found Lacking, Again
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Approximately twelve months ago, the Congressional Oversight Panel found the program HAMP to be struggling to get off the ground despite having been in action for nearly a year and a half.
The latest evaluation of the Home Affordable Modification Program (HAMP) came out and the result was the same deal. HAMP has undergone several tweaks since April 2010.
But the Congressional Oversight Panel, created to issue periodic reports on the TARP bailout program, found little improvement in performance according to a St Louis mortgage broker.
Instead of helping 3 million to 4 million struggling mortgage borrowers keep their homes, as originally projected, HAMP will prevent only about 700,000 to 800,000 foreclosures.
That number is dwarfed by the 8 million to 13 million foreclosures expected to occur by 2012.
Through the end of October 2010, there have been 519,648 permanent loan modifications made.
And, since the Treasury Department lost the authority to further restructure the program at the end of October, bolstering its prospects is no longer likely, the report said.
In fact, banks are offering more modifications through their own process than through the government’s.
The new report cited several reasons for the program’s failure.
For one, servicers, the companies hired by banks to manage the loans, earn extra profits through fees imposed during foreclosure.
Because of that, servicers were preventing or delaying modifications for their own monetary advantage.
Another big obstacle was that many loans in trouble often came burdened with second mortgages in the way of home equity loans or lines of credit where those banks had to sign off on potential deals.
Because so many homes are worth less than the borrowers owe or negative equity, there is little money to cover the first loan, let alone a second mortgage.
So many banks in the second position refused to sign off unless they were paid something.
The oversight panel also faulted the Treasury for not having effective means of collecting and analyzing HAMP data.
The department, said the panel, did not even set meaningful goals against which to weigh the program’s effectiveness.
Because participation has been so limited, HAMP will probably only spend about $4 billion of the $30 billion allocated for it.
Even the loans that have been permanently modified through HAMP have not performed well.
Many have already re-defaulted, and that basically means taxpayer money down the drain.
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