Only about 700,000 foreclosures will be prevented by the Home Affordable Modification Program (HAMP), according to a Congressional Oversight Panel report released today.
The report, titled, “A Review of Treasury’s Foreclosure Prevention Programs,” said that number is far fewer than the three to four million foreclosures the program originally aimed to prevent.
And it’s just a drop in the bucket if you consider the eight to 13 million foreclosures expected by 2012.
“It is too late for Treasury to revamp its foreclosure prevention strategy, but Treasury can still take steps to wring every possible benefit from its programs,” the report said.
“Treasury should enable borrowers to apply for loan modifications more easily — for example, by allowing online applications. Treasury should also carefully monitor and, where appropriate, intervene in cases in which borrowers are falling behind on their HAMP-modified mortgages.”
Interestingly, it wasn’t so long ago that Treasury made the program more difficult to qualify for by requiring paperwork upfront after many unqualified borrowers were booted from the program.
Mortgages More Complicated than Originally Thought
The report noted that a number of issues have made the program far less successful than imagined.
For one, mortgages are far more complex than a simple relationship between a borrower and a mortgage lender, what with investors and loan servicers involved.
And loan servicers stand to make money from foreclosure-related fees, more than the incentives tied to the program may offset.
Then there are pesky second mortgages, which stand in the way of the entire process.
HAMP appears likely to cost only around $4 billion, far less than the $30 billion originally earmarked – unfortunately, that money can’t be reallocated to a more effective program.
To date, just over 500,000 permanent loan modifications have been completed under HAMP.