The HAMP Repeal and Deficit Reduction Act of 2011 has been introduced to end a program many have termed a colossal failure. And, they may be right.
According to the Federal Home Finance Agency's third quarter report issued late last year, far more foreclosures took place than were prevented by the efforts of the Home Affordable Modification Program (HAMP) and its sister program, called the Home Affordable Refinance Program (HARP).
While many refinanced their home loans with the best mortgage rates available, most of those refinances did not go to the underwater borrowers the program was designed to help. And HAMP, initially expected to help between three million and four million homeowners, brought permanent mortgage modifications to just over half a million. To put that into perspective, during the time that HARP and HAMP were in effect, over four million foreclosures took place.
HAMP's curious foes
You'd think that lawmakers from California and Florida, two states among those hardest hit by the foreclosure crisis, would not want any form of help for their beleaguered citizens abolished. But you'd be wrong. Supporters of the bill from California and Florida claim that many of their constituents were harmed by the program.
While they thought they had a chance of receiving permanent mortgage modifications including mortgage rate reductions, they continued to make trial payments when they could have been saving up their money for new housing options. Instead, they made payments while mortgage servicers paved the way to foreclose.
Other critics of the program argue that it failed because there was insufficient oversight. HAMP relied too heavily on voluntary mortgage servicer cooperation, which was unlikely to happen when companies are obligated to pursue profits for their shareholders. In addition, it lacked necessary enforcement powers; the Treasury Department has not imposed a single penalty on any mortgage servicer for violating HAMP guidelines.
The critics may well be correct. At this point, it doesn't seem that there is any possibility of making this program a success. Perhaps future state-level programs and penalties can accomplish what federal efforts could not.