Only 1 in 4 Got Mortgage Relief
Wednesday, March 02, 2011
Only 1 in 4 Got Mortgage Relief
Republicans Now Want to Kill HAMP Program That Made Only a Small
Dent
By: Alan Zibel and Louise Radnofsky, Wall Street
Journal
Just one in four of the 2.7 million homeowners who sought to
participate in the Obama administration's signature mortgage
assistance program have succeeded in getting their monthly payments
reduced.
The rest failed to qualify for the program or were disqualified
after they were initially accepted into the program, according to
an analysis by the Wall Street Journal of data on applicants to the
program newly released by the Treasury Department.
In all, about 680,000 homeowners who applied for the Home
Affordable Modification Program, or HAMP, had received permanent
modifications of their loans and were making timely payments or
were still in the trial phase as of December.
Almost 6.7 million U.S. homes were lost to foreclosure, short
sales or turned back to lenders between 2000 and 2010, according to
Moody's Analytics. Another 3.6 million could meet the same fate
through 2013.
The White House launched the HAMP program in 2009 as a broad
attempt to reverse the rising number of home foreclosures by
reducing families' mortgage payments, typically by lowering the
interest rate and extending the term of a loan. But the
administration's strict eligibility criteria resulted in far lower
participation than expected.
This translated into a smaller cost to taxpayers. Two years ago,
the Obama administration said as much as $75 billion would be
needed for HAMP. About $1 billion has been spent so far.
The program has faced sharp criticism. Neil Barofsky, the
departing special inspector general overseeing the program, has
faulted the administration for launching it with inadequate
analysis and only partially developed guidelines. This led to
delays and confusion, and the program "continues to fall short of
any meaningful standard of success," he said a report released in
January.
House Republicans have called the program a waste of money and
are considering a bill this week to end the program. "In an era of
record-breaking deficits, it's time to pull the plug on these
programs that are actually doing more harm than good for struggling
homeowners," Rep. Spencer Bachus (R., Ala.) said last week.
Treasury spokeswoman Andrea Risotto said the program helped
establish standards across the loan servicing industry and prompted
the industry to make more private modifications. The Republican
legislation "would close the door to struggling homeowners seeking
relief in the face of the worst housing crisis in generations," she
said.
The program offers payments to more than 100 mortgage servicers
if they successfully complete loan modifications. It has tighter
qualification criteria for admission than loan modification
programs offered by individual banks or other lenders. Homeowners
who are accepted into the program have to get through a trial
period of at least three months before their modifications are made
permanent.
Almost half of the applicants to the program, or about 1.3
million homeowners, were declared ineligible from the start.
Applicants were most often rejected because they didn't submit
the necessary paperwork, or it was lost by their mortgage company.
Nearly 266,000 applicants were denied for this reason. Another
255,000 were ineligible because they were considered to have
affordable mortgages, defined as less than 31% of pretax income.
Borrowers also were turned down because they had loans for more
than $730,000 or were not considered in danger of defaulting
soon.
Another 770,000 homeowners started the program but were later
disqualified, most for the same paperwork and eligibility problems
as the applicants turned away at the outset. Only a small number
were rejected for failing to make trial payments.
Homeowners in southern states had the hardest time getting into
the program and staying there. In the four-state region of
Arkansas, Louisiana, Oklahoma and Texas, about 83% of applying
homeowners failed to complete the loan-modification process. That
proportion was 80% in the four-state region of Alabama, Kentucky,
Mississippi and Tennessee.
Homeowners had the least trouble getting into the program in New
England, where the rejection rate was 72%, and in western states,
including Alaska, California, Hawaii, Oregon and Washington.