• 16
  • March
    2011

When it was created, many believed that the Housing Affordable Modification Program would play a major part in solving the foreclosure crisis and in restoring the housing market. However, many homeowners who attempted to use HAMP have reported that not only was the program unsuccessful in helping them avoid foreclosure, but that it actually made their situations worse.

HAMP was designed to offer mortgage modifications to homeowners who found themselves unable to make their mortgage payments due to a job loss or similar financial hardship. The program initially offered these modifications on a trial basis without the guarantee that the change would be permanent. After the trial period, during which homeowners would pay less on their mortgages, many were told that they did not qualify for a permanent modification. They were then left with more mortgage debt and a ruined credit rating due to months of making less than the full payments on their mortgages.

Now, Senator Bob Corker of Tennessee has joined with Senators Jim DeMint and Tom Coburn in introducing legislation to do away with HAMP. The senators claim that of the 1.4 million temporary mortgage modifications created under HAMP, almost 800,000 have failed, giving the program a failure rate of 54 percent. They claim that modifications made in the private sector have a much better rate of success, and that the federal program should therefore be abandoned.

Their bill is supported by Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program. In testimony before Congress, Barofsky said that HAMP's "failed trial modifications often leave borrowers with more principal outstanding on their loans, less home equity, depleted savings, and worse credit scores."

Source: The Chattanoogan, "Corker Seeks to End Housing Affordable Modification Program (HAMP)", 9 March 2011