A recent study shows that as many as 800,000 house owners could have avoided foreclosure if the banks had fully implemented the HAMP plan (Home Affordable Modification Program) to help them when the economy tanked.
The study was conducted by scholars and officials of the government and has been released by ProPublica. It noted that some of the banks had proper number of qualified staff to deal with mortgage modification but the majority of the banks were not properly equipped.
The programme allowed qualified borrower to alter mortgage terms by lowering of interest rates, extending repayment periods and sometimes reducing the principal. In all this would have lowered their payments per month.
It was the sub-prime mortgages that saw hikes in interest after the end of the ‘teaser’ period of low rates, which had lured the borrowers into the trap. When the economy tanked the house owners failed to refinance; they found themselves saddled with unaffordable monthly commitments for a house that was worth less than the loan. The stage was set for en masse foreclosure by the banks.
The guiding principle behind HAMP was that it would have been relatively better for the economy if these borrowers repaid slowly rather than not pay at all. HAMP has modified only 1.2 million house loans – a far cry from the goal of 3 million to 4 million targeted by Obama administration.
The study noted that some banks were better set up for doing the modifying in comparison with others. It was unfortunate for most of the house owners that their banks were not similarly well equipped with proper qualified number of staffs. If these banks had done the modifying at the same pace as the others then there would have been more modifications – about 800,000 more. HAMP would have touched 2 million and not 1.2 million.
Even then, this 2 million would have been a far cry from the goal of Obama. It is the HAMP fracas that has resulted in the crisis dragging on to the sixth year with plummeting property market. Nearly 2 million hoses are still in foreclosure – an extraordinarily high figure. During the last few years the backlog has not significantly cleared. It remains difficult to forecast when normalcy will return.
Photo by Anankkml.
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Proper Implementation of HAMP by Banks Could Have Helped 800,000 to Avoid Foreclosure
