SIGTARP Reports HAMP Hampered by Redefaults

A report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) brings news of borrowers redefaulting on their mortgages at alarming rates, as 306,000 people who have taken advantage of the Home Affordable Modification Program (HAMP) are now failing to make payments on their mortgages. Only four years after its inception, HAMP borrowers were investigated by SIGTARP in the agency's Q2 Report to Congress which found that of the 1.2 million homeoners who have made use of the HAMP program, nearly one-third of that total have failed to continue to make payments. Also interesting is that SIGTARP found that the longer an individual remains with a HAMP modification, the more likely that borrower is to default on their loan, with nearly 46 percent of those enrolled in the program since 2009 re-defaulting. The recent announcement that HAMP is being extended for an additional two years is meant to increase the number of homeowners currently enrolled, while also seeking to prevent the amount of homeowners default. "The Treasury needs to research why so many borrowers are dropping out of the program," said Christy Romero, Special Inspector General of SIGTARP. Some of the concepts kicked around by SIGTARP in their report include: ►Conducting further research into the causes of redefault; ►Requiring servicers to develop and use an “early warning system” to actively reach out to homeowners who may be at risk of redefaulting; and ►Providing help and information to homeowners who have redefaulted “Unfortunately, the real tragedy is that many borrowers probably could not afford the house at the time the loan was consummated. Sometimes a foreclosure is the only real outcome,” said John H.P. Hudson, area manager for San Antonio, Texas-based Premier Nationwide Lending. “The government programs may have had the best intentions of saving; however, their execution was not always up to par.”