One of the first programs created by the Obama administration was the Home Affordable Modification Program (HAMP). This new type of loan mod was supposed to save up to four million homes, but has been so ineffective that it is now the focus of numerous congressional hearings! Indeed, what options are left for struggling homeowners?
Typically, borrowers can apply for HAMP or work with their lender’s in-house loan modification program. As a recent study by non-profit Propublica has shown, neither have been very effective: “In September, servicers provided modifications for about 2.9 percent of the total delinquent loans…that’s about how many the industry was doing before the government’s program (HAMP) launched in March, 2009.” Furthermore, the $50 billion pledged to aid homeowners has largely sat idle, as hundreds of billions of TARP money have flowed to the lenders to tremendous profit.
This was just one of the problems that servicers were grilled by congress about. “I think it’s safe to say that HAMP isn’t meeting its goal of preventing foreclosures,” said Rep. Maxine Waters, D-Calif., who chaired the hearing. Similar hearings have taken place in different subcommittees regarding the inaction of the federal bank regulators and the workings of “Rocket Dockets,” “Robo-signers,” and “Foreclosure Mills,” as the federal government considers how best to restore the rights of homeowners.
Investors, regulators, attorneys, & activists have all been campaigning for reform and are now getting serious consideration. Proposals include the elimination of the “dual-track foreclosure,” where homeowners who are told they are safe in a loan mod are still being served with foreclosure. Advocates have also called for a new federal agency that will hold banks accountable for negotiating loan mods in bad faith.