HAMP: Borrower Neglect or Bank Incompetence?by Tim Manni
Earlier this week the Home Affordable Modification Program (HAMP) received yet another black mark on its increasingly-poor record. Reports now say that more borrowers have dropped out of HAMP than have graduated to “permanent” successful loan mods. According to our friend Alan Zibel at the Associated Press (AP), 155,000 borrowers dropped out of HAMP in May alone; 436,000 borrowers have dropped out since the program began.
How many borrowers has HAMP help so far? Unfortunately, only 340,000. While the program will still be up and running for a few more years, if the numbers continue like this, this program will have failed to even come close to reaching the 3-4 million borrowers it set out to “save” from bad loans or foreclosure.
Why So Many Dropouts?
According to lenders and servicers, borrowers are still failing to provide all the proper paperwork. This ongoing issue (we first wrote about it back in December) has been especially pronounced as of late given the recent changes to HAMP which require all the documentation to be submitted at the start of the process.
However, according to the AP and the countless comments we have received on this blog, borrowers are claiming that banks are misplacing and losing their paperwork.
We want to hear from borrowers and mortgage professionals alike — share with us your HAMP experience — what do you think is wrong with HAMP? -Leave us a comment-
What Good is HAMP?
With the number of HAMP dropouts now exceeding the number of permanent mods, and given the fact that some experts are of the opinion that the majority who have been “permanently” helped by HAMP will still end up in foreclosure, I have to ask you, “What good is HAMP; is continuing the program even worth it?”
As more people leave the program, a new wave of foreclosures could occur. If that happens, it could weaken the housing market and hold back the broader economic recovery.
Even after their loans are modified, many borrowers are simply stuck with too much debt – from car loans to home equity loans to credit cards.
“The majority of these modifications aren’t going to be successful,” said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. “Even after the permanent modification, you’re still looking at a very high debt burden.”
Unqualified Borrowers: Are You Getting Help Elsewhere?
It’s hard reading comments day in and day out about borrowers who are frustrated with the HAMP process and/or those who didn’t qualify for one reason or another. Many times they’re fed up with their lender or servicer — they receive conflicting information, paperwork gets lost, etc.
HAMP’s frustrations are shared equally among lenders, servicers and borrowers. The mortgage mod world has had to learn and implement a number of new and ever-changing programs. Professionals have also had deal with an influx of thousands of troubled borrowers with only limited staff, resources and training, not to mention considerable regulatory pressure.
The word from Washington is that borrowers are getting help even outside of HAMP. I don’t believe that the relationship between borrowers and lenders — inside or outside of HAMP — is as productive as Washington projects. To me, it seems like another example of Washington “spin” in an attempt to downplay HAMP’s lack of success:
Obama administration officials contend that borrowers are still getting help – even if they fail to qualify [for HAMP]. The administration published statistics showing that nearly half of borrowers who fell out of the program as of April received an alternative loan modification from their lender. About 7 percent fell into foreclosure.
Do you know anyone who has not qualified for HAMP, yet still received a loan modification from their lender?
We want to hear from lenders, servicers and borrowers: why is HAMP failing to get the job done, who’s at fault? Leave us a comment, let us know.