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March 24th, 2010

Update1 Should Millions of Trial Mods Be Considered a Victory? No.

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Update1: We said ‘no way’ (read our original post below), and now even the special inspector general for the Troubled Asset Relief Program (TARP) agrees (emphasis added):

A government watchdog is criticizing the Obama administration for establishing a “meaningless” goal for its flagship mortgage assistance program.

The report issued late Tuesday by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, says the Obama administration is measuring the performance of the program by a questionable standard.

At the program’s launch in February 2009, Obama officials said it would help 3 million to 4 million homeowners. But with only 170,000 borrowers completing the program so far, administration officials now emphasize that the plan’s goal is to merely offer help to those millions.

“Defining success by how many offers are given can reasonably be perceived as essentially meaningless,” Barofsky wrote. Instead, the program’s goal “must relate to how many people are helped to avoid foreclosure.”

Original Post (published on 03/18/10): If you were to ask us, the Federal modification process is a failed system (at least so far). Why do we say that? Along with the criticisms we read from the major news outlets on a daily basis, this blog has received a near-constant stream of comments from frustrated borrowers who, for one reason or another, haven’t received a permanent loan modification. To their credit, the Treasury has taken measures to alter the process so that borrowers must provide all the required paperwork upfront to allow lenders to more easily determine their eligibility.

That being said, we can’t help feeling confounded and extremely skeptical when sources come out and claim HAMP to be a success on any level.

According to an article from the Wall Street Journal, the most recent claims of success come from the administration, who are encouraged by HAMP’s achievements up to this point (emphasis added):

Given the complexities of the program and the bureaucratic inertia of the big banks that are struggling to carry it out, it isn’t very surprising that the results so far have failed to meet [the administration's] expectations. As of Feb. 28, 168,703 households had “permanent” loan modifications under the program, while 835,194 were in the trial stage.

Wells Fargo & Co. said last week that, among the 108,000 borrowers who had completed three trial HAMP payments to Wells as of Feb. 28, only about half were expected to qualify for permanent mods.

Even so, the administration argues that HAMP is going well because more than 1.3 million homeowners have received offers of trial modifications. That’s closing in on half way to three million, the lower end of the original goal, and the administration has given itself until 2012 to hit that target.

Yet getting an offer of help doesn’t translate into home-saving success in a huge number of cases, though it does delay the foreclosure process considerably.

Back in January, we wrote a post about how some analysts praised HAMP as a stabilizer of home prices, and “a vehicle” for delaying foreclosures, as though these were the goals of the program. We cautioned everyone not to “Turn Nothing Into Something.”

Continually changing HAMP’s goals and measurement of success is a bad habit that the administration should stop. HAMP was NOT designed to delay foreclosures, it was NOT designed to offer as many trial modifications as possible, it was specifically and solely designed to prevent them.

In the spirit of the NCAA Tournament we offer up this analogy: Lowering the basketball hoop doesn’t necessarily make you a better basketball player, it just makes it easier to score.

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One Response to “Update1 Should Millions of Trial Mods Be Considered a Victory? No.”

  1. freedy1 (freedy1 don mckelvey) Says: March 24th, 2010 at 3:17 pm

    RT @hshassociates: Should Millions of Trial Mods B Considered a Victory? http://bit.ly/cfaHSc We said NO & even the special inspector general for TARP agrees

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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