The Congressional Oversight Panel (COP) has published its second report on the Home Affordable Modification Program (HAMP). And, much like its first HAMP report, released last year, the COP had few positive observations on the program, which, through the end of February, had resulted in about 168,000 permanent modifications.
‘Treasury's response continues to lag well behind the pace of the crisis,’ the report's executive summary says. The summary later adds that, ‘It now seems clear that Treasury's programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble.’
Last year, 2.8 million homeowners received a foreclosure notice. According to the COP, that means that for every borrower who avoided a foreclosure through HAMP in 2009, another 10 borrowers lost their homes.
The COP commended the Treasury Department for implementing HAMP denial code processes and for launching its "conversion drive" last year, as well as for the recently announced programs aimed to assist unemployed and underwater borrowers. The impact of these new programs, however, might not be felt until early 2011, the panel points out.
"Although Treasury should be commended for trying new approaches, its pattern of providing ever more generous incentives might backfire, as lenders and servicers might opt to delay modifications in hopes of eventually receiving a better deal," the report says.
The COP additionally notes that borrowers who go through the HAMP process will still face a "precarious future" in which their resources will be "severely constrained." The typical post-mod borrower still pays about 59% of her or his total income on debt service, according to the COP. The report also warns of large redefault volumes at the five-year mark, at which time HAMP borrowers will see their payments rise again.
"The redefaults signal the worst form of failure of the HAMP program: Billions of taxpayer dollars will have been spent to delay, rather than prevent, foreclosures."
The House Financial Services Committee will examine HAMP's recent changes today. In prepared testimony, professor Alan White of the Valparaiso University School of Law calls HAMP a failure.
"In its current form, HAMP will not and cannot achieve the necessary degree of foreclosure prevention and mortgage debt reduction that are the essential prerequisites to an economic recovery," White's testimony reads.