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Tuesday, February 7, 2012
President’s New Mortgage Plan and the Failure of HAMP
Big government and corporations are careful
to bury their failures in the fine print.
The Treasury Department released its
analysis of the Home Affordable Mortgage
Program (HAMP) program. Readers must sift through a large number of statistics
to find that only 933,000 homes mortgages have been permanently modified since
April 1, 2009.
Politicians, the press and housing analysts attacked the results
of the report as evidence that HAMP is a failure and that the president’s new
follow-up plan will do no better.
The mystery about HAMP is why it has not
worked. The Treasury’s January scorecard about the program does not say
directly. The president’s new proposal indicates that he thinks one of the
largest problems with the old plan was a lack of incentives for banks that hold
The FHA will guarantee new, refinanced mortgages under his latest program. That
should make banks more open to resetting home loans. The risk of the process
will be taken off of their books, which it was not entirely before.
The new plan lacks much detail, but its
enemy likely will be bureaucracy, as is evident in HAMP’s results. Some
1,775,000 mortgages have been considered for modification, but are still “trial
modifications.” That is a lot of “trials” for a program that has run for three
years. Either the people with these mortgages were not creditworthy — which begs
the question of how they got into the program originally — or they are caught in
a process that is so slow it cannot move them quickly to permanent status.
The trouble with large national programs
regulated by the federal government, and operated bank-by-bank and
mortgage-by-mortgage, is the lack of an efficient way to push millions of homeloans through
such an unwieldy system. That may be at the core of the failure of HAMP.
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