Just about a year ago we wrote about this program. The HAMP program is intended to assist those going into foreclosure to modify their mortgage and retain their home ownership. At that time, 230,000 loans had been permanently modified, and some were questioning its effectiveness since it was supposed to assist 2 to 3 million people. A year later, 540,000 mortgages have been permanently modified and the expectation now is that 3-4 million should have been assisted.
Brookings reports that these numbers are unlikely to increase much since only 30,000 people are applying for this program monthly. Additionally they report that many of the loans that have been modified still place the borrowers with payments as high as 60% of pretax income. The normal ratio used to be 36% on the high side.
Brookings went on to say "Furthermore, it is not clear what better alternatives we have for preventing foreclosures. It has long been recognized that a key limitation of HAMP is that it does little to prevent households from defaulting because they owe more than their homes are worth. The main proposed solution to this “underwater” mortgage problem is forcing or attempting to incentivize lenders to write down the principal value of loans. But, some experts are arguing that the costs per foreclosure prevented under such a scheme could be exorbitant—implying that the idea, at best, raises fairness questions and, at worst, could damage the financial system in a way that would have far-reaching repercussions for the rest of the U.S. economy."
Not a real pretty picture for this particular remedy for the housing market.
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If the goverment is going to get invovled they should treat the same way as smoking / seatbelt polocies. With a marketing campaign and a educational process for hardship homeowners to be a aware of an option. Yes it helps but many of these homeowners are attempting to complete process on there own.
ReplyDeleteI beleive the mind set of banks is to get there money first and offer program second. THe banks control of this issue should be outsourced as a whole with a service provider offering gurantees. Then this creats a caution in the wind of who governs them.
Consider a capitalist approach and what would be best? yeah its scary with an idea people make money on others hardship and how far it could be taken.
Truely Jason