The IML Real Estate Blog

Making Home Affordable Failing?

November 16th, 2010 2:34 PM by Dave Gubler

Making Home Affordable Failing To Prevent Delinquency in  a durable fashion...  But don't tell that to the administration and the Treasury Department.

Has the Making Home Affordable program (HAMP) been the success that the administration and the Treasury Department asserted it would be?  The facts about loan modification paint a different picture.  The Making Home Affordable Servicer Performance Report through September 2010 begins with a "Report Highlights" section.  I have to say after reviewing the entire report I had to go back and read the "Highlights" again.  If these are the highlights then I don't think we want to see the lows.

"Early data indicate that HAMP permanent modifications are performing well over time."

Whoa... Slow down now. Excuse me, are we looking at the same numbers? 4.6% of permanent HAMP modifications granted 3 months ago are already 60+ days delinquent!  3 months in and nearly five percent of them are seriously delinquent?  Why?  If the permanent modification was designed to be sustainable then how come so many people are falling behind already?  Wait, it gets worse... 9.8% of the homeowners that are 6 months in to their permanent HAMP modification are already 60+ days delinquent.  See a pattern here? Amazingly 15.6% of all permanent HAMP modifications that are 9 months in are 60+ days delinquent (and most of these are 90+ days late).  A truly frightening 25.4% of permanent HAMP modifications that are 12 months in are 60+ days delinquent as of the date of the report.

Making Home Affordable Permanent Modification Delinquency Rate  

From 4.6% to 9.8% to 15.6% to a dismal 25.4% over 3 month intervals and this indicates "HAMP permanent modifications are performing well over time"?  Insulting!  In general I try to refrain from being overly critical of programs designed to help preserve home ownership but the patronizing way in which Treasury and the administration are defining "success"  is outrageous.

Of the 1,369,414 HAMP trial modifications started only 466,708 have resulted in a permanent HAMP modification (34%).  Considering that you have about a 1 in 3 chance of getting in to the program and based on the high re-default rates once permanent loan modification is achieved is HAMP really working as proposed?

The simple fact is that HAMP is a failure that exacerbates the housing market's woes and provides false hope to struggling Americans. Let's not forget that a permanent HAMP loan modification is preceded by a trial payment period that is averaging more than 6 months.  Based on the pattern of failure seen in the permanent loan modification delinquency rate is it wise to exhaust more of your resources only to obtain a "permanent" resolution that is doomed to failure?  A personal choice indeed but consider carefully before starting down HAMP's trail of tears.  Considering other foreclosure alternatives would be prudent it seems.

Everyone's home cannot be "saved".  This just isn't possible without destroying our financial future in the process.  I empathize deeply with homeowners that did not choose risky mortgage products (short-term ARMs and Neg AM loans)  or take on more payment than they could sustain but are now losing their home because their income has declined in the wake of the stumbling economy.  Unfortunately HAMP will not be the solution for the vast majority of struggling homeowners.  In simple terms most distressed homeowners will have to find a way to increase their income or sell their home  (HAFA or standard short sale) in order to avoid the harsh consequences of foreclosure.  We should all be offended and alarmed, though, that the administration is claiming success while a program that we are all paying for (in different ways) is failing. If HAMP was truly designed to prop up the banking sector rather than help homeowners (as all indications seem to point) can the administration and Treasury at least be transparent and forthright about it?  No, it seems we are expected to accept being conned  and meekly acknowledge that failure is the new success. 

Posted in:General
Posted by Dave Gubler on November 16th, 2010 2:34 PM

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