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Marketplace: HAMP is falling short of expectations

July 15, 2022

By Mitchell Hartman 

Kai Ryssdal: There’s a report out today from the Congressional Oversight Panel for the TARP, the bank bailout. It says the Obama Administration’s mortgage modification program, with the handy acronym of HAMP, is falling short. The White House had hoped to keep 3 to 4 million families from being foreclosed upon — now it’s looking more like 700,000 at best.

There are all kinds of problems with the program, including the fact that the Treasury Department won’t admit HAMP has a problem. Marketplace’s Mitchell Hartman reports.

Mitchell Hartman: Maybe there oughta be a 12-step program for the Treasury Department: “My name is Timothy Geithner and my Home Affordable Modification Program isn’t working too well.”

So far though, Treasury officials haven’t acknowledged that. They say the program has pushed private lenders to modify more mortgages on their own. Even former Senator Ted Kaufman, who issued today’s report, doesn’t think the program should be scrapped.

Ted Kaufman: Oh, stick with it, because even for those 700,000 or 800,000 Americans are going to avoid foreclosure, that’s a very important thing.

Unfortunately, 10 times that many — 8 to 13 million Americans — are at risk of losing their homes. And Susan Wachter at the Wharton School says it’s going to be tough to help a lot of them because their mortgages were sliced and diced into complex securities.

Susan Wachter: These are extremely difficult, there are a number of parties, starting with the investors, the second-mortgage holders, and the originators themselves.

Still, Wachter says, more needs to be done now to get people’s payments down to something they can afford. Otherwise…

Wachter: When these foreclosures do occur — that is, the foreclosures that could have been prevented by modifications or short sales — they could bring us to a second leg down in housing prices; a double-dip.

So what more can be done? Richard Green, director of the USC Lusk Center for Real Estate, says future government efforts need to help underwater homeowners by lowering the principal they owe on their mortgages, not just the interest rate.

Richard Green: What that does is it means that people aren’t trapped in their houses. They could sell their way out of trouble. Now, when they do that, of course the lender will take a hit. But again if the property goes into foreclosure, they’re going to lose a whole lot more money.

Plus create problems for their neighbors and the rest of us.

The original article can be found here.