The federal government created the Home Affordable Modification Program (HAMP) in order to help struggling borrowers to stay in their homes. Over the last many months, we’ve told you about HAMP, its promises to homeowners, and the Obama Administration’s expansion of the program this past June. In fact, effective June 1, 2012, HAMP was expanded to include additional homeowners in the program. However, a recent study reported in DSNews.com shows that there’s a shocking amount of loan defaulting going on.
Indeed, there are more defaults on modified mortgages than anyone expected. According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), HAMP doesn’t seem to have helped very many homeowners. Currently, 26 percent of homeowners in the program have re-defaulted, and that rate actually continues to worsen, says DSNews.
Which Homeowners Are Eligible for HAMP?
We’ve explained the premise of HAMP before: if you’re employed but you’re still having difficulty making your monthly mortgage payment, HAMP is supposed to be able to help lower those payments “in order to make them more affordable and sustainable for the long term.” The administration expanded the program earlier this year, allowing more homeowners to be eligible for its services, including:
· Homeowners applying for a modification on a home that’s not their primary residence (the property is a rental property, and it’s either already rented or the owner intends to rent it out)
· Homeowners who didn’t qualify for HAMP previously because they had a debt-to-income ration of 31 percent or lower.
· Homeowners who had a HAMP “trial period plan” and defaulted on the trial payments
· Homeowners who had a HAMP permanent modification and defaulted on their mortgage payments (meaning that they lost good standing in the program)
The expanded criteria were supposed to mean that more homeowners would be able to stay in their homes. However, the DSNews article suggests that there may be some problems with the HAMP premise.
Massive HAMP Defaults
Since it began in 2009, HAMP has provided nearly 1.2 million modifications to struggling homeowners. However, of that large number, 306,538 have fallen behind on their modified mortgage payments by more than three months. In fact, 22 percent of those re-defaulters have already entered into the foreclosure process. According to SIGTARP, that means that only 865,100 borrowers are still part of the program. Under the HAMP rules, if you miss three or more payments, you’re disqualified for assistance.
It seems that more borrowers have defaulted in recent years than when HAMP was created in 2009. According to SIGTARP “the percentage of modified homeowners who end up as redefaulters has steadily increased over time.” In 2009, only 1 percent had re-defaulted, while the number now stands at 26 percent.
There is hope, though. Only 1 percent of “homeowners who received modifications in early 2013” have re-defaulted. With taxpayers losing money on the re-defaults of the past few years, something needs to be done. In order to continue improving the program, SIGTARP has offered recommendations that the Treasury plans to implement. The Treasury will “conduct further research into the causes of redefault,” and it will “require servicers to develop and use an ‘early warning system’ to actively reach out to homeowners who may be at risk of redefaulting.”
If you have questions about the HAMP program or are having trouble making your monthly mortgage payments, you don’t need to handle the burden alone. An experienced foreclosure defense attorney has specialized knowledge about mortgages, modifications, and avoiding foreclosure. Contact us today to discuss your case.
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