HAMP-vs-H4H: Both are failuresby Tim Manni
On Wednesday of this week, Peter Miller — financial expert, nationally-syndicated columnist and long-time friend of HSH — wrote a piece for the Huffington Post titled “Obama Mortgage Modification Plan — 100 Times Better Than Bush.”
Miller compares the number of permanent loan mods made through President Obama’s home affordable modification program (HAMP) against the number of borrowers who successfully refinanced through President Bush’s Hope for Homeowners program (H4H).
Miller stated that while seemingly everyone is blasting President Obama’s efforts to stabilize housing, the success of his most popular home-preservation program far surpasses that of President Bush’s:
Just about every posting regarding the Obama mortgage modification program says it’s a dud. Those on the left say not enough has been done, those on the right say too many homeowners are washing out of the program. What’s too often left out is any sense of context.
The reality is that the Obama loan modification program has saved roughly 100 times as many homes from foreclosure as the programs started under President Bush. That doesn’t mean the Obama plan is perfect or wonderful, but it’s surely better than many commentators suggest.
The same day Miller’s article was published in the Huffington Post, I published a post here titled “HAMP: Still fundamentally broken.” My gripes and criticisms over HAMP — both past and present — are well documented in this blog. You’d have to go all the way back to 2009 to read the last post we wrote about H4H. You can take my word for it, none of the posts we wrote on H4H were very flattering.
Not a fair comparison
Personally, I think there’s no real way to compare HAMP with H4H. Forget apples and oranges, it’s more like comparing apples and tangelos. First off, you’re comparing a modification program against a refi program. H4H called for lenders to accept immediate losses and share future gains (if any) with HUD; HAMP rewards lenders with thousands of dollars (both upfront and over time) for modifying loans. Any wonder why one has had greater success in the marketplace? Granted, both were designed to preserve homeownership, but the numbers alone suggest the influence, or lack thereof, each program has had on the market, thus reflecting their overall effectiveness.
While H4H was a voluntary program that presented very little incentive for lender participation, all banks who took TARP money are required to participate in HAMP. Furthermore, HAMP has successfully influenced the private industry to a point where it has begun to develop its own loan mods strategies and techniques based off of HAMP’s design. Even though HAMP has been criticized for its high redefault rates, some say that the delays in foreclosures they provide have helped to prevent home prices from falling further and faster.
All that said, it doesn’t change my opinion that HAMP — in its 18 months of existence — is still fundamentally broken. The bottom line is that more borrowers have failed out of HAMP than have been approved for permanent mods.
Why HAMP needs to improve
I, along with many, many others, have focused so much time and effort in pointing out HAMP’s flaws because this is a program that a) has currently been adopted by the country’s largest, most influential mortgage lenders; b) will be with us until 2012; c) has already proven its potential to help hundreds of thousands of homeowners. That’s why I believe HAMP needs to be improved.
H4H was so profoundly complicated that lenders quickly realized it was a waste of time. H4H never really got off the ground, and at this point, is so far back in the rearview mirror that it’s not even relevant. HAMP has become the national program that we’re sinking billions of dollars into to help save homeowners. To me, it’s less about saying that one program is better than another, it’s about highlighting the shortcomings of our current home-preservation efforts to make sure we are helping as many homeowners as possible.
One program failed to help practically anyone. It failed, but at least it hasn’t cost us much. The other has cost billions and is still failing to reach its goals. Neither one can be called a success by any stretch of the imagination.