HAMP Hits Bump in Road

The Increase In the number of government-sponsored loan -modifications is slowing

. The month of July has shown us the slowest pace of growth since the HAMP program began with roughly 17,000 new trial loan modifications. Worse than the number of new trial of loan modifications, was the number of temporary modifications cancelled by the Treasury Department for month of July.

According to data released by the government on August 23, the Treasury Department cancelled 96,025 temporary modifications during the month of July. That brings the total to 616,839 temporary loan modification cancellations as of July. The number of borrowers that have received permanent loan modifications as of July totals 434,716. That number is significantly lower than the number of Treasury Department temporary modification cancellations.

When started nearly 18 months ago, the HAMP program was expected to help anywhere from 3 to 4 million borrowers that were in trouble of facing foreclosure. HAMP offers modifications to loans through reduction of the loans interest rate, a longer loan term or a combination of both. To receive a permanent loan modification, borrowers must first enter a trial modification period where they are expected to make at least three modified payments on time. Once the borrower receives a permanent modification through the program, their monthly payments will be reduced significantly. The average reduction will be around $500 a month. That averages to $6,000 a year reduced from monthly payments.

The program is far from the 3 to 4 million loan modifications mark. Half of the 13 million modifications that have been offered to borrowers have been cancelled. Many borrowers leave the program willingly and receive some type of relief through the private-sector or become current on their payments without any modification. Only around 15% of borrowers who exit the HAMP program are in a stage of the foreclosure process.

While the HAMP program was well intended, it is not meeting expectation. The real question regarding this program should be, do we continue to waste taxpayer's money on a stalled effort?

HAMP Hits Bump in Road

By: Paul Escobedo

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