December 10, 2009: HAMP's dismal results call for new measures
CA—Today the Treasury Department announced that only 4 percent of trial modifications under the Home Affordable Modification Program (HAMP) have converted to permanent modifications. The dismal results of a multi-billion dollar program show that all carrots and no sticks have been a recipe for failure when it comes to dealing with banks and mortgage servicers.
Out of nearly 760,000 trial modifications, only 31,000 have become permanent. Through our network of nonprofit counseling agencies, the California Reinvestment Coalition has gathered numerous examples of borrowers who wait months past their trial periods with no results, who qualify for a HAMP modification but are wrongfully denied, or who begin loan modification negotiations yet receive a notice of foreclosure sale in the middle of the process.
"The problems we hear about are endless, and they can be traced back to the primary issue of lack of accountability," said CRC Associate Director Kevin Stein. "The banks and servicers are continuing to blame borrowers for their poor outcomes, but we know from countless cases that borrowers are asked to submit documents over and over again by servicers who give them the runaround and seem incapable of implementing the program."
A total of eight to 10 million foreclosures are estimated within the next five years, according to the Congressional Oversight Panel. In order to address a crisis of this magnitude, the California Reinvestment has advocated for these solutions:
* Congress needs to pass judicial loan modification or "bankruptcy cramdown." It is the one policy change that can alter the power imbalance between financial institutions and borrowers.
* The Obama Administration is collecting race and ethnicity data and should be investigating for potential fair lending violations. In CRC's last statewide survey of housing agencies, counselors reported that people of color appear to be getting worse outcomes in loan modification. That must be investigated.
* HAMP is not set up to deal with the tidal wave of option adjustable rate mortgages that are re-setting to higher payments now. About 60% of all option ARMs may be in
* HAMP has nothing for unemployed and underemployed borrowers, though now job loss is a leading cause of mortgage defaults and foreclosures. Rep. Barney Frank has introduced a proposal to provide federal dollars for borrowers who have lost their jobs and cant make mortgage payments.
"Please can you help us! We want accountability," said Lynne Heller, a subprime borrower who has been trying to save her home for the past 16 months. "At this point the bank is merely toying with us because they can. Through inaction we are all complicit in this screwing of the middle-class. We can afford our home with a principal loan reduction. We have been willing to listen to any fair loan offers and have now paid six months of payments on the HAMP program."
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For more information or to arrange interviews with advocates and borrowers, please contact Tram Nguyen at (415) 864-3980; tnguyen@calreinvest.org
The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 275 nonprofit organizations and public agencies across the state.
