Federal Mortgage Modification Plan Disappointing So Far
Red tape and limited savings are hampering the much-lauded $75-billion mortgage modification plan. A new round of government help may be on the way as foreclosures are expected to reach 3 million in 2010.
Atlanta - The Obama administration announced Friday that its much-lauded mortgage modification plan has had a disappointing start, helping far fewer Americans stay in their homes than originally hoped.
Intended to bolster struggling homeowners, the Home Affordable Modification Program (HAMP) has permanently helped only 66,000 homeowners out of 4 million that may be eligible.
As foreclosures are expected to rise from 2.8 million in 2009 to 3 million in 2010, analysts expect the Obama administration to modify the modification program to keep it from becoming another major political issue in a year when Democrats are facing a growing anti-spending sentiment among the voting public.
"HAMP is running into issues of too few permanent modifications, and re-default performance is expected to be poor," Barclays Capital said in a recent research note to clients.
Treasury Department officials said Friday that more than 900,000 homeowners have signed up for trial modifications and the program has yielded "measurable success." The conversion rate from trial to permanent modification, however, is only about 15 percent.
So What's Hampering HAMP?
One problem reported by the Treasury Department is that only 75 percent of homeowners are able to stay current on their new payments for a three month trial period. What’s more, the Obama administration and mortgage servicers say homeowners aren’t fully completing the needed documentation proving income and hardship.
But homeowners are blaming servicers, who get paid for successfully lowering monthly payments. One dissatisfied applicant used the Huffington Post to register his dissatisfaction – and shed some light on why the program may need to be fixed.
Calling the program a "cruel joke," HAMP applicant Craig Vale said "you are falsely led to believe that some help may actually come your way, but in truth the banks want little to do with you or the HAMP program."
Mr. Vale claims he’s saving less than $2 a day on his reworked mortgage, calling the entire thing a "failure." The irony," he adds, "is that my bank will tell uncle Sam they ‘successfully’ modified my mortgage."
More than $1.5 Billion Saved
Treasury officials said that 854,000 homeowners taking part in both trial and permanent modification requests have saved more than $1.5 billion on their mortgage payments, receiving an average reduction of $516 a month.
US banks, insurance companies and carmakers, meanwhile, have received over $373 billion in taxpayer bailouts, writes the HuffPo's Shahien Nasiripour.
In his weekly Saturday address, President Obama vowed to keep up the pressure on US banks to do right by the American taxpayer, who, after all, bailed out much of the financial industry over the last 18 months.
Saying that, "We’re not going to let Wall Street take the money and run," Obama vowed to make sure that banks can never put the US economy at risk again.