Is Congress Destroying All Hope for HAMP?

March 10, 2011

U.S. Sens. Jim DeMint (R-SC) and Bob Corker (R-TN), both members of the Senate Banking Committee, and Tom Coburn (R-OK), a member of the Senate Finance Committee, have introduced legislation in the Senate to end the Housing Affordable Modification Program (HAMP). The House Financial Services Committee (HFSC), chaired by Rep. Spencer Bachus, has also approved legislation that would both terminate HAMP and the Neighborhood Stabilization Program (NSP), HR 839, the HAMP Termination Act and HR 861, the NSP Termination Act. Enactment of these two pieces of legislation in the House will prevent more than $30 billion in additional spending on the programs. Approval by the HFSC moves both HR 839 and HR 861 forward for consideration by the House.
HAMP's initial intent was to assist seven million homeowners obtain loan modifications. To date, HAMP has only permanently modified just over half a million loans, as a record 2.9 million homes were foreclosed on in 2010 with a projected 20 percent increase expected in 2011. In contrast, the Financial Services Roundtable reports that the private sector has completed nearly 9.8 million mortgage modifications since 2007, and over 1.2 million in 2010 alone.
“Congress should move swiftly to end the President’s disastrous mortgage program. It has funneled millions of taxpayer dollars to big banks and Fannie Mae while taking struggling homeowners on a wild goose chase as foreclosures increase,” said Sen. DeMint. “My office has heard from numerous South Carolina families who went to HAMP for help, but after months of false promises and mountains of paperwork they were left in worse financial shape. HAMP is just the latest failure of President Obama’s big government experiments. HAMP has not even reached ten percent of its intended goal of helping seven million American homeowners modify their loans, but it has succeeded in pushing hundreds of thousands of other Americans closer to foreclosure and personal bankruptcy.”
Under HAMP, more loan modifications have failed than been successful. Out of 1,466,500 temporary modifications, more than 792,500 have failed, a failing rate of 54 percent.
“The American people sent us here to tell them the truth, and the truth is our country is in serious trouble because of excessive government spending," said Rep. Bachus. "We are on an unsustainable path that will lead to ruin, that will lead to a diminished standard of living for our children and grandchildren, and that will reduce the greatness of our country. We must take action immediately to change course and put a stop to this reckless culture of spending that has ruled Washington for far too long.”
HR 839, introduced by Rep. Patrick McHenry (R-NC), terminates Treasury’s authority to provide new assistance under HAMP while preserving the contracts made prior to the bill’s enactment. HR 839 prevents $29 billion in Troubled Asset Relief Program (TARP) funds from being spent to continue this ineffective program.
"It's an undisputed fact that the HAMP program has been a colossal failure," said Erik Wind, co-founder of Foreclosure Guard. "Quite a few borrowers have ended up worse off as a result of it. The lenders themselves have had a much better track record. It's their loan, they'll take reasonable measures to ensure some kind of return on it."
HR 861, introduced by Rep. Gary Miller (R-CA), terminates the NSP and prevents an additional $1 billion from being spent on the program, which has reportedly consumed nearly $6 billion. 
"These Congressional actions have told the American people and the real estate market as a whole, ‘You are on your own ... good luck," said  Steven Gillan, executive director of the American Alliance of Home Modification Professionals (AAHMP). "The vote sends a clear message to the servicers and Treasury that they have nothing to fear in the future from Congress. It has been the hope of many that Congress would have fixed HAMP problems and it’s Fatal Flaw instead of canceling it. Studies have clearly shown that HAMP is a workable program if implemented properly at the servicer. HR 839 must still pass the House and go to the Senate. It is believed it will not get through the Senate and the White House has indicated it will veto the bill. That does not matter much because the damage has already been done; the task of stabilizing real estate values by stopping preventable foreclosures is now in the hands of the servicing industry. The fate of millions of American families is left in the hands of an industry that has a financial motive to foreclose. How will this action by Congress help the real estate market which is needed to move our economy forward—it’s truly frightening."
Rep. Carolyn Maloney (D-NY) introduced an amendment before the HFSC to HR 839, The Maloney Amendment, which would extend the HAMP program to accommodate 500,000 more mortgages before it ends.
"The New York Metropolitan Statistical Area has the second largest number of permanent  HAMP modifications in the country at 31,500—second only to California’s 35,514," said Rep. Maloney. "Now my friends on the other side of the aisle are proposing to terminate the program while offering no alternative plan to replace it with. In offering this amendment, I am presenting my colleagues with a compromise by recognizing that the program will have to come to an end. But shouldn’t we help as many people as we can before that happens?"

Compliance, Originations, Residential, Servicing, Settlement