After the housing crash and the rise of foreclosures nationwide, many homeowners secured mortgage modifications through the Home Affordable Modification Program (HAMP). This is a federal program designed for homeowners who aren’t unemployed, but who are still struggling to make monthly mortgage payments. According to the Making Home Affordable (MHA) program, which administers HAMP and is an official program of the Departments of the Treasury & Housing and Urban Development (HUD), HAMP can lower monthly mortgage payments so that they’re “more affordable and sustainable for the long-term.”
However, according to a recent Congressional report, the Office of the Special Inspector General for the Troubled Asset Relief Program (TARP) found that a surprising number of homeowners who received mortgage modifications through HAMP have defaulted on those loans. And more surprisingly, that number may continue to ruse. The Chicago Tribune reported on the problem and its statistics, noting that the longer a homeowner remains in HAMP, the more likely that homeowner is “to re-default out of the program.”
Making Home Affordable through the Federal Government?
The MHA government program was established to “deliver mortgage relief” to families across America. According to the program’s website, MHA is “a critical part of the Obama Administration’s broad strategy to help homeowners avoid foreclosure, stabilize the country’s housing market, and improve the nation’s economy.”
Within this program, HAMP was created to provide permanent loan modifications to employed borrowers who were unable to make their high monthly mortgage. Through HAMP, homeowners could have their monthly payments lowered so that they could stay in their homes and avoid foreclosure. The program is still operative, and struggling homeowners can still apply for mortgage modifications through the system. Yet, the recent article in the Chicago Tribune suggests that these government programs may not be working as planned.
So what’s going on with borrowers re-defaulting on their mortgages? And what does it mean for homeowners in Illinois?
Greater Harms for Re-Defaulting Borrowers
According to the U.S. Treasury Department, re-default rates range from 28.9 percent at the lower end, up to 46.1 percent at the high end—that’s nearly half of all borrowers with a loan modification. And unfortunately, the Treasury doesn’t require lenders or servicers to report specific reasons that borrowers default on loans, so there’s no way to develop an “early warning system,” according to the inspector general. In other words, there’s no clear data with which to “identify potential problems and correct them.”
Worse than original loan defaulting, re-defaulted modifications are causing borrowers to lose their homes to foreclosure at a quicker pace. According to the Chicago Tribune, some of the blame may lay with the government funding models. The article reported that the government “has fallen short of the amount of help it promised to give homeowners when HAMP and its sister Home Affordable Refinance Program debuted in spring 2009.”
In fact, the Treasury promised to provide “affordable and sustainable relief” to nearly 4 million borrowers who could be at risk for losing their homes to foreclosure. However, to date only 862,279 homeowners have received permanent modifications through HAMP, and that number is likely to drop even further as many of those borrowers are defaulting on their modified loans. Specifically, more than 300,000 borrowers have already defaulted, and the Treasury expects that number to rise based on its current data.
If you or a loved one have received a modification through HAMP or TARP and are at risk for re-defaulting on your mortgage, an experienced foreclosure defense attorney can talk with you your options with you today. You don’t want to lose your home to foreclosure. Contact us to discuss your case.
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