The Treasury Department and managers of the Home Affordable Modification Program (HAMP) are scrambling to figure out why homeowners who used the government’s bailout mechanism to save their homes are re-defaulting on their payments.
The program, originally designed to assist homeowners who were facing foreclosure following the 2007 sub-prime crisis, has reportedly saved 1.2 million people from losing their homes, but a report from the Special Inspector General who oversees the government’s Troubled Asset Relief Program (TARP) says that the loan modifications that were supposed to get American families back on their feet aren’t working as well as expected.
“We launched this program in response to the worst housing crisis since the great depression,” Treasury Assistant Secretary for Financial Stability Tim Massad said in a press call.
“There will always be an inherent risk of homeowner default in programs like this,” Massad added.
Approximately 10% of homeowners with an active HAMP permanent modification — a total of 88,000 out of 865,100— have missed one or two monthly mortgage payments and are at risk of redefaulting out of the program.
Redefault rates of the oldest 2009 HAMP permanent mortgage modifications have continued to increase as they age and have reached a 46% redefault rate. The 2010 HAMP permanent mortgage modifications are redefaulting at a rate of 38%.
The Treasury department is going to launch an investigation into why the program isn’t working.
Not only has the program fallen far short of that goal but with each year of the program, a growing number of homeowners have re-defaulted, the inspector general found.
“Treasury needs to research why so many borrowers are dropping out of the program,” said Christy Romero, the head of SIGTARP.
In 2009, as President Obama assured the nation that his multi-billion dollar economic bailouts would restore the economy and the housing market to stability and growth, we noted that you can modify these mortgages all you want, but that one important factor would be essential to their success.
But it is evident that re-.default is highly attributed to job loss.
According to the June 2013 jobs report, less than half of able-bodied Americans have a full time job.
The following report further illustrates the problem(s) we face.
Two food stamp recipients have been added for every job ‘created’ under President Obama’s watch: