Is the HAMP Loan Modification Program Really a Failure?

As the foreclosure crisis grinds on month after month and year after year, it is hard to find any news to feel good about. Even the recent dip in foreclosure petitions in October was probably due more to the confusion and delays caused by the apparent failure of banks and servicers to process foreclosures in a legal manner rather than any real shift in the market. Foreclosure deeds in 2010 already exceed the number of deeds in 2009 and continued high unemployment and tight credit are likely to cause this crisis to continue for a long time.

And it is now an old story that banks and servicers are not agreeing to loan modifications at anywhere near the rate we need to stabilize the market, keep homeowners and tenants in their homes, and avoid further neighborhood decline.

Despite this, recent federal statistics indicate that 10,535 Massachusetts homeowners obtained a permanent loan modification under the federal HAMP program between January 1, 2010 and October 31, 2010, and a total of 12,154 Massachusetts homeowners have received one since the program began in 2009.  While 12,154 is far too few compared to the 40,686 homeowners who have been foreclosed since 2007 and the 20,603 who have been foreclosed since 2009, it is still 12,154 families who have kept their homes. (The number is probably a bit lower since about 11% of these modifications re-default.)  Significantly, 10,535 homeowners have received a modification during 2010 compared with 11,334 homeowners who have lost their home to foreclosure.

In other words, without HAMP, the problem would be nearly twice as bad this year. Clearly, HAMP is by far the largest scale program yet developed to prevent foreclosures. MACDC members and other non profits continue to use HAMP to help thousands of homeowners avoid foreclosure and stay in their homes.  With all the challenges associated with loan modifications, foreclosure prevention counseling remains the fastest and most cost effective method for stopping foreclosures, preserving family wealth, avoiding displacement, and stabilizing neighborhoods.

Fortunately, these non profits will soon benefit from additional resources to support their vital work. The Division of Banks has issued an RFP  to provide additional funding to these nonprofit agencies under a program established by legislation MACDC helped enact in 2007. Also, Morgan Stanley will soon make available $2 million in new funding based on an Agreement signed with Attorney General Coakley as a result of Morgan Stanley’s involvement in subprime lending. MACDC and CHAPA are working with the AG and Morgan Stanley to ensure that this funding is released in early 2011.

I wish the banks would modify more loans and I wish the federal government would put more pressure on the banks to do so. In the meantime, however, let’s recognize that high quality foreclosure counseling by non profits have combined with the HAMP program to save 12,154 homeowners in our state. We can be proud of that.



I agreed with Joe's point that HAMP has helped a lot of people even though if it were run better it could have helped several tens of thousands more to save their homes.

Community groups that we are part of have met with Treasury over the last two years about changes needed to make HAMP work better. They continually take the position that it's a voluntary program for banks to participate in so they can't push them to hard even when they continually violate the guidelines of the program they signed a contract to participate in. Given that all taxpayers bailed out these big banks, we feel Treasury could be tougher in making them implement the programs and these banks would not dare to walk away given how much of their continued existence was due to all taxpayers.

However, it's important to recognize any positive accomplishment and as Joe points out some 12,000 Massachusetts homeowners saved their homes because of HAMP and that's good.

In March, unemployed homeowners will be able to apply for up to 2 year loans to prevent foreclosures until they get a new job under the HUD administered Emergency Home Loan Program. Massachusetts will get $61 million of the $1 billion program. Community groups like ours and Brockton Interfaith Community working with Congressman Barney Frank and other groups from across the country actually played key roles in getting this passed.

These funds should enable CDC's to help another 3-4,000 homeowners save their homes from foreclosure. The counseling funds Joe mentions will help CDC's and other non-profits help additional homeowners save their homes which is great.

Thanks to MACDC for their work to help pass the state foreclosure prevention law and thanks to CDC's who are doing nonprofit foreclosure prevention counseling to help homeowners.

Lew Finfer (617)822-1499 Massachusetts Communities Action Network

Joe I can agree with you that the work that CDC's are doing to help families stay in their homes is extremely valuable and is well deserving of extra funding. I also believe that the HAMP program has many flaws; one not mentioned is that it lowers the credit of the person applying for a modified loan. It would be extraordinary if the government and most especially banks would become more organized and be held more accountable for the mortgage crisis and take full responsibility with stabilizing the market. That would be a perfect world though, not the free for all greedy reality we're living in so it is admirable that CDC's would take on this work that help keep our families and communities healthy, stable and happy.

I forgot to answer the question, "Is the HAMP Loan MOdification Program Really a Failure?" No it is not a complete failure in my opinion, but there is a lot of room for improvement and it is the only program available so we have to make the best use of it.