Green Room

HAMP defaults at “alarming rate,” says TARP IG

posted at 12:41 pm on April 25, 2013 by

Plus ça change, plus c’est la même chose

Struggling homeowners who received loan modifications under a federal government program are defaulting on their mortgages at an alarming rate, according to a watchdog report released Wednesday.

The report from the special inspector general for the Troubled Asset Relief Program said the Treasury Department’s Home Affordable Modification Program, or HAMP, has failed to ensure that mortgage reductions are sustainable.

Home loans modified in the third and fourth quarters of 2009 are now defaulting at a rate of 46 percent and 39 percent, respectively. As of the end of March, more than 312,000 homeowners have defaulted on mortgages modified under HAMP, according to the report.

“This is a significant problem,” said Christy Romero, special inspector general for TARP. “When homeowners fall out of these modifications, all of a sudden they’re facing huge mortgage payments. If they can’t afford it, they’re going to get foreclosed on.”

Just a reminder — this program cost US taxpayers $75 billion, as part of Barack Obama’s stimulus bill in 2009.  Taxpayers who presumably keep up with their mortgages ended up subsidizing those who couldn’t (or in some cases wouldn’t) in an effort to keep the housing market from collapsing.  In some cases, the assistance has helped, but a 39%-46% default rate is outrageous.  It demonstrates that the program didn’t do a very good job in judiciously investing public funds into mortgages, which was the main cause of the 2008 financial collapse as well.

 

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From the article:

The report did not offer specific reasons for the high default rate, noting that Treasury does not require mortgage servicers to report on such matters.

This is bullhockey. There are always reasons for the default. I work in this area and have not gotten more than 1 in 10 of my clients through the modification process. They offer trial modifications, then after the borrowers complete the process they deny final eligibility, demand immediate payment in full of everything owed, and then foreclose. I want to know whether this 39-45% of borrowers actually received a modification or whether they just applied.

alwaysfiredup on April 25, 2013 at 12:49 PM

This economy is a ticking time bomb. From yesterday:

http://www.zerohedge.com/news/2013-04-24/march-durable-goods-implode-plunge-57-capex-recovery-put-indefinite-hiatus

ZH notes: This was the biggest miss in headline data and the biggest drop since August, and the second worst since January 2009.

I think we’re heading for official recession soon. The DOW is running on fumes from QE.

Doomberg on April 25, 2013 at 1:33 PM

So they admit they weren’t paying attention to the general reasons half (or more) of the folks needed the loan modifications to begin with?

rogerb on April 25, 2013 at 2:33 PM

I want to know whether this 39-45% of borrowers actually received a modification or whether they just applied.

Well, the article says “homeowners who received modifications.” It’s doubtful that’s a mistake.

RadClown on April 25, 2013 at 4:46 PM

Maybe if this administration wasn’t killing so many jobs more people could afford to make the payments.

The Rogue Tomato on April 25, 2013 at 4:58 PM