HAMP Serves Fraction of Distressed Homeowners
As of February 2011, more than 600,000 homeowners were granted "permanent" mortgage modifications under the Obama administration's Home Affordable Modification Program (HAMP). However, more than 800,000 homeowners were bounced out of HAMP as of January.
HAMP launched in 2009. Since then, 607,607 permanent modifications were started, but 68,114 have been canceled which means 539,493 homeowners remain in active modifications. The "permanent modifications," which last for five years, reduce borrowers' monthly payments by roughly $500 through reductions in the interest rate, extensions of the mortgage terms and temporary forbearance of principal owed. There is no debt forgiveness in HAMP.
Combined with the three-month trial modifications that have been canceled instead of made permanent, 808,354 homeowners have been removed from HAMP.
When HAMP was announced, the Obama administration said HAMP would modify mortgages for 3 to 4 million homeowners. The Administration is now backing away from that goal, and said that by setting affordability standards and developing a framework for mortgage servicers, HAMP has "catalyzed improvements in modifications industry-wide."
HAMP is voluntary, and there are no penalties for violating program guidelines. Servicers get $1,000 payments for permanent modifications, but servicing incentives remain for delinquency and foreclosure. Bills.com readers report being in trial modifications that last longer than the standard three months, banks losing paperwork, and banks foreclosing on readers in trial modifications. Readers also report modification proposals that extend the term to 40 years, and the addition of heavy fees and penalties to principals. The result is modified loans that cost the homeowner far more than originally contracted.
Members of Congress have introduced legislation to repeal HAMP.
Contact your mortgage servicer if you are in financial distress and cannot afford your mortgage. If your mortgage servicer does not seem to be bargainign in good faith (misses deadlines, loses your application, offers conflicting proposals), consider attending a NACA event.