Bankruptcy

HAMP Update: Still Ineffective

By Adam Levitin

Another HAMP data report is out.  Same old story--HAMP isn't doing very much for very many people. We're up to 346,816 permanent modifications. That's out of 1.7 million HAMP eligible mortgages and 5.7 million mortgages that are 60+ days delinquent. Drop in the bucket. The trial modification numbers are a bit better, at 1.4 million, but the number of new trials each month seems to be flattening out--just 30,000 new trials started in May.  That means new permanent modifications will also start to taper off in a few months. And there are an awful lot of failed trial modifications, as Felix Salmon has noted. 

Two particular items jump out at me. First are the dispositions of canceled trials that Felix commented on. There are a lot of alternative foreclosure mitigation programs, but we don't know how effective they are or whether they are just a way for servicers to extract more late fees/recoup non-interest bearing advances before ultimately foreclosing. 

Second, the HAMP compliance numbers are disturbing. While the second-look reviews only disagreed with servicer conclusions in 3.9% of cases, they couldn't determine whether the servicer's decision was appropriate in over 20% of cases. In other words, a quarter of the HAMP modification decisions have been wrong or are at least suspect. But this is just an operation issue. HAMP's got plenty of operational glitches, but the real problem is conceptual. The program just isn't up to the task. 

I've long been skeptical about HAMP as doing too little at too high a cost, and I think the numbers bear out that skepticism. How much evidence has to amass about the failure of HAMP to provide effective foreclosure relief before the program is canned and the policy debate is refocused on providing meaningful foreclosure relief? 

Full post as published by Credit Slips on July 21, 2010 (boomark / email).