An editorial in the Providence Journal succinctly outlines the reasons President Obama’s program to curb foreclosures appears to be failing. The Home Affordable Modification Program (HAMP) offered incentives to mortgage companies to reduce payments for struggling homeowners, but as of September only about 1,700 homeowners had passed through all the necessary hoops to win a new permanent loan modification. In the meantime, foreclosures are on the upswing and well over a million mortgages were 60 days past due in October.
HAMP was not designed to deal with one of the biggest aspects of the foreclosure problem: falling home values that leave borrowers “under water,” owing more than their houses are worth. Primarily, HAMP is aimed at reducing interest payments but not principal. Not surprisingly, underwater borrowers are not rushing to sign up, and they're not finding much help when they do. Participants in the program have to show their worthiness by completing a series of trial payments, and around 650,000 borrowers have done that. But many say they are subjected to disorganized claims for additional paperwork, and others fail to provide the necessary documents in the first place. Last year, foreclosure sales topped 1 million. This year there were fewer, thanks to loan-modification efforts and moratoriums, but the danger of a stalled HAMP is that another new wave of foreclosure sales could swamp the market, sending home prices back down and threatening the economic recovery.
HAMP was not designed to deal with one of the biggest aspects of the foreclosure problem: falling home values that leave borrowers “under water,” owing more than their houses are worth. Primarily, HAMP is aimed at reducing interest payments but not principal. Not surprisingly, underwater borrowers are not rushing to sign up, and they're not finding much help when they do. Participants in the program have to show their worthiness by completing a series of trial payments, and around 650,000 borrowers have done that. But many say they are subjected to disorganized claims for additional paperwork, and others fail to provide the necessary documents in the first place. Last year, foreclosure sales topped 1 million. This year there were fewer, thanks to loan-modification efforts and moratoriums, but the danger of a stalled HAMP is that another new wave of foreclosure sales could swamp the market, sending home prices back down and threatening the economic recovery.
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