Foreclosure Prevention Plan - HAMP

Foreclosure Prevention Plan - HAMP

Foreclosure Prevention Plan - HAMP

Timothy Geithner, the United States Treasury Secretary, has stated that the Home Affordable Modification Program (HAMP) has been one of the most successful crisis programs in the history of such programs. He testified that the HAMP program, a program regulated under TARP (Troubled Asset Relief Program), has helped stabilize the housing market by generating loan modifications for people and helping them avoid foreclosure.

However, the Congressional Oversight Committee that oversees TARP feels otherwise. In 2010 foreclosures have remained steadily high, despite the Home Affordable Modification Program. Statistics show that nearly 5 million properties entered into foreclosure proceedings this year. This includes any property that entered into proceedings, even if the property did not enter into final foreclosure.

The Congressional Committee questioned Geithner extensively about the statistics that show only 1/3 of the people applying for the program was actually helped. They also questioned why stricter regulations have not been placed on lenders who routinely "misplace" paperwork for loan modifications that cause the home to enter into foreclosure. Committee Chairman, Ted Kaufman (D) stated that the program may work better if HAMP allowed applicants to apply online. The online application process would help consumers trace their application process and create digital files that could be easily replaced if the lenders cannot find the paperwork.

The program, created in 2008, is designed to pay lenders to provide loan modifications to people that qualify for the program. The program, however, has undergone many changes since its inception, and the current program is considered to be a "watered down" version of the original plan. The Congressional Budget Office first projected the program to exceed $350 billion, which has since lowered its costs now to $25 billion.

Geithner went on to say that the Home Affordable Modification Program is currently developing ways to continue to help distressed homeowners. One of the new programs that are being considered is a second mortgage modification program when a modification has been issued on the first mortgage.

The Treasury Secretary continued by stating that there were many other issues in the economy that needed to be addressed before seeing the final benefits of the TARP/HAMP programs. High unemployment is the main concern, of course, followed by compensation programs for lending executives. It is his belief that lending institutions compensate their employees in such a manner that it encourages risk-taking when it comes to lending money. Geithner believes that placing more pressure on the banks, in the form of public stress tests, will encourage less risky behavior on their part

Foreclosure filings dropped to its lowest level in two years in November. Filings were down over 20% from the numbers recorded in October and almost 15% lower than the numbers for the previous November. Many are seeing this as another sign of recovery, but others do not. During the previous 60 days many lenders placed a moratorium on foreclosure filings until they verified if all their paperwork was completed correctly. The robo-signer scandals of recent months has made many lenders and servicing companies slow down their foreclosure process to ensure that it is being done correctly.

People that are closely watching the foreclosure markets are more interested in the foreclosure filings for the next few months. The temporary loss of unemployment benefits, the end of the holiday season and the end of the self-imposed halt on filings by lenders may change these percentages quickly.

Foreclosures remain very high in many of the Southern states. Florida currently has the most active foreclosure proceedings taking place in the nation. Texas, Arizona and California are close behind. Speculators have stated that they will not believe a full recovery is taking place in the real estate market until these areas stabilize.

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