There is a growing consensus that the federal Home Affordable Modification Program (HAMP) championed by the Obama Administration is a failure. Borrowers blame the banks for not being responsive and banks lay that same accusation at borrowers along with claiming that they are not properly submitting paperwork. Through November 30, only 31,382 permanent loan modifications had been completed under HAMP. With predictions for 1.7 million foreclosures in 2010, HAMP is barely a drop in the bucket.
A major problem is that HAMP requires income, and many borrowers face foreclosure because they have none. Also, the approval process is frustratingly bureaucratic, with confusing paperwork flying back and forth often discouraging borrowers.
There are a number of suggestions on how to improve HAMP. Provide direct loans to unemployed homeowners. Compel banks to write-down mortgage principal on mortgages that exceed home values, which is the case for more than a quarter of homeowners. Force banks to rent foreclosed properties to former homeowners. Apply more government pressure to ensure that loan servicers are properly handling loan modifications. Organize the mortgage industry to provide more help for borrowers to navigate the process. Finally, there are even those that advocate for nothing to be done because those that got themselves into trouble should suffer the consequences, and the economy would recover quickest if foreclosures sank housing prices.
It is true that HAMP has been unsuccessful for most distressed borrowers. Still, HAMP does provide relief to borrowers that patiently work the system. Homeowners may benefit from speaking with an attorney who has successfully negotiated loan modifications to avoid foreclosure.
