HAMP Champ: What Ever Happened to That Obama Mortgage Modification Plan?

One year ago this month President Obama announced a plan to help alleviate the housing crisis. Part of that plan included incentives for banks and lenders to renegotiate mortgages with homeowners who were struggling to make payments.

"Under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower's income," the president said. "And this will enable as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure."

Up to $75 billion could be spent on this program, called the Home Affordable Modification Program, or HAMP. Program -- $50 billion of which could come from the Troubled Asset Relief Program funds. (The other $25 billion would come from the Housing and Economic Recovery Act of 2008, used to modify mortgages owned or guaranteed by Fannie Mae or Freddie Mac.)

As of December 30, $35.5 billion had been allocated to the program, the Special Inspector General for the TARP program, Neil Barofsky, reported to Congress last month , with $10 billion "allocated to encourage HAMP modification by protecting investors from potential home-price declines in their mortgage portfolio assets in regions where forestalling foreclosure may lead to significant losses."

But only $15.4 million had been disbursed.

Why so little?

Because far from the 3-4 million the president had said the HAMP program would help, only 66,465 Americans have received permanent mortgage modifications.

With a slow start to the program, the Obama administration announced in July 2009 that it would seek 500,000 trial loan modifications by November 1. As of the end of December there were 902,620 trial modifications, many of which were done through verbal agreements and with no guarantee they would become permanent.

In our interview yesterday with Treasury Secretary Tim Geithner , I asked him if a year ago, were I to tell him that a year later only 66,000 Americans had permanent mortgage modifications through the program, if he would have said at the time that the HAMP program was a success.

"I think it's very important to recognize this program is providing very, very substantial cash flow relief right now to more than three quarters of a million Americans," Geithner said. "We believe we're still on a path to be able to reach many, many more American households. And of course we're going to make sure that those temporary modifications translate into permanent modifications."

A lot of those temporary modifications were done verbally, I pointed out.

"We're absolutely committed to make sure that translates into what we said it would, which is for eligible Americans — they're getting permanent modifications that substantially lower their monthly payment…For the average household that translates into hundreds and hundreds of dollars every month for them."


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