Posted on Thursday, March 17, 2011
Treasury released its new numbers for the administration’s Home Affordable Modification Program (HAMP) Wednesday, just hours before a House Financial Services subcommittee convened a hearing to terminate the government’s flagship foreclosure prevention program and three other federal housing programs.
As of the end of January, active permanent HAMP mods totaled 539,493. Servicers placed just under 18,000 distressed homeowners into permanent modifications during the first month of this year – coming in below the 30,000 monthly average shown in earlier reports. At the end of January, active HAMP trials tallied 145,260.
The House subcommittee’s looming “kill-bill” hearing was a sensitive subject for Treasury officials when they spoke with the media Wednesday morning prior to releasing the latest program numbers.
“There are those today that say we should end these programs,” said Tim Massad, assistant Treasury secretary for financial stability. “They are saying ‘because you haven’t helped enough people, you shouldn’t help anymore.’ That just doesn’t make sense.”
Critics say HAMP is preventing the market from clearing and self-correcting because of the artificial stimulus it provides and the time it adds to the foreclosure timeline in evaluating delinquent loans that can’t be saved.
They also say in many cases HAMP is only delaying the inevitable by modifying loans that will eventually become delinquent again and further add to the foreclosure pipeline.
But according to Massad, re-defaults on mortgages modified under the HAMP guidelines “are still very low.” He said, “Ninety percent of the people who’ve been placed in permanent modifications are still in them.”
Massad also stressed that the program has strict eligibility requirements, intentional by design to ensure HAMP reaches the most distressed homeowners and provides assistance to those who really need it.
“We’re only modifying mortgages when it makes economic sense to do so,” Massad said. “There is an economic model that is used in each case,” Massad explained, and he says he’s yet to hear complaints from the naysayers about the viability of that model. In fact, officials noted that it has become the new industry standard to ensure borrowers are put into sustainable mortgage modifications.”
“So why continue?” Massad said, “Because 20,000 to 30,000 homeowners each month are receiving modifications. These programs are reaching people. They are helping people stay in their homes. They’re helping their neighbors. And they’re helping the economy overall.
“If people have other ideas, we’re open to them [but] no one is putting forth a better alternative,” Massad said.
Speaking to the critics’ claims that the cost of HAMP outweighs the benefits, Massad said, “The amount of money we spend is proportionate to number of people helped. It’s the type of program one should like if you’re for prudent use of taxpayer dollars.”
HUD Assistant Secretary Raphael Bostic added, “There’s a conversation about to take place on the Hill about these programs. It’s important that we have that conversation in the context of where the market is now…and the market is still very fragile…. It’s important to take the long-run view.”
Massad added, “Discussions [to end HAMP] are very unfortunate. We are opposed to it and we will resist it.”
Unless House lawmakers succeed in terminating the program early, HAMP is scheduled to run through 2012, with the end date for entering into new modifications set for December 31.
Phyllis Caldwell, head of Treasury’s Homeownership Preservation Office, says the pool of eligible homeowners continues to drop – it’s now at about 1.4 million. That’s down from Treasury’s estimate of 3.4 million eligible borrowers as recently as March 2010.
Massad says the department had previously overestimated how many people would be eligible, chalking it up to the fact that “in a crisis, you have to act quickly.” However some of the reduction in the eligibility pool is due to loans being brought current both through HAMP and servicers’ proprietary modifications.
By: Carrie Bay, DS NEWS