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August 18th, 2010

Treasury defends HAMP. I’m still not satisfied

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I came across an article in The Street this morning (hat tip: National Mortgage Professional Magazine) that was an “edited transcript of [Treasury Department spokeswoman Andrea Risotto's] response to specific criticisms” concerning the home affordable modification program (HAMP).

I was hoping this article would provide some concrete explanations to such long-standing questions as “what is taking so long, what’s with the lack of success, why has the program changed so often and why are the results so much better for servicers outside of HAMP?” Unfortunately, Ms. Risotto’s responses didn’t reveal too much new or enlightening information that would help us get a better sense of what we can do to make this program better.

(Without having access to the original transcript, I’m not sure if that’s because The Street only published minimal portions of the Treasury spokeswoman’s responses, or if her responses weren’t all that extensive to begin with.)

What I found particularly interesting about Ms. Risotto’s answers to why servicers outside of HAMP have fared much better, was that she didn’t really answer the question. (That portion of The Street’s three-page article was the longest section, totaling seven paragraphs).

Ms. Risotto said that Making home affordable (MHA) has changed the landscape of loss mitigation. MHA has created more options for homeowners that didn’t exist a few years ago. Beyond the modification effort, there’s a program for unemployed homeowners, one for those who have negative equity (I say that’s debatable), one designed to promote short sales, as well as a deed-in-lieu program, explained Risotto:

We’ve made more options available under “Making Home Affordable,” we want to give servicers more tools in their toolbox, if you will.

That’s all well and good, I say, but the question remains: if the structure is the same in and out of HAMP, why are the outcomes so different?!

Is the problem middlemen?

A Wall Street Journal article I came across this morning was about how “vulture” investors are snapping up distressed home loans “at a deep discount” and have been able to renegotiate the terms of the troubled loans much more quickly and efficiently:

As the nation struggles with the worst foreclosure crisis since the 1930s, [mortgage-bond trader Lewis] Ranieri’s investment fund and others like it are emerging as the best hope for the roughly seven million U.S. households behind on their mortgage payments. Nimble, flush and willing to strike deals with borrowers, these funds have an edge over banks and other lenders that can be mired in bureaucracy and hampered by government rules about which loans can be renegotiated and how.

Borrowers less lucky than the [struggling homeowners Anna and Charlie] Reynolds family must work with middlemen—loan-servicing firms that don’t actually own loans, but represent banks and investors, and collect mortgage payments on their behalf.

Why have you been denied?

I feel as though at least some our readers have been denied for HAMP for reasons other than what the Treasury spokeswoman listed: 1)Didn’t submit all the your paperwork, 2)couldn’t keep up with the trial payments and 3)your debt-to-income ratio was below 31% to begin with.

If you have been denied for HAMP, was it because one of these three reasons? If so, tell us which one. If not, let us know why your lender or servicer said you were denied for a HAMP modification.

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About the HSH Blog

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

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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