Has HAMP Actually Helped Homeowners Avoid Foreclosure?

The July 24 quarterly report to Congress from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) revealed that as many as 26 percent of all borrowers who received help from the Home Affordable Modification Program (HAMP) re-defaulted in some form.

When introduced in April 2009, HAMP had the goal of assisting 4 million homebuyers with modifications. 865,000 have successfully been assisted, but out of the 1.2 million total modifications made, 306,000 re-defaulted and 88,000 more are predicted to follow.

Re-defaulting, however, isn’t synonymous with foreclosure. As the 408-page report points out, those who re-defaulted went into private sector modification programs or foreclosure. So far, 22 percent of all re-defaulted mortgages have foreclosed.

Another troubling factor SIGTARP points out is, the longer a homeowner is involved with HAMP, the greater the chances of re-defaulting are. Specifically, homeowners who began in 2009 have a 46-percent chance, while those who started a year later have re-defaulted at rates of 38 percent.

Nevertheless, a pattern emerges from these instances: Homeowners who re-default often received lesser reductions, remained underwater, or had subprime credit or high debt to start with.

As homeowners find HAMP not to be as beneficial as it could have been, the re-defaults result in further negative ramifications: Specifically, taxpayers have paid $815 million up to April 2013 for 163,000 re-defaulted permanent modifications.

HAMP continues until December 2015. The Treasury Department is currently researching the program’s success rate in order to make changes.

SIGTARP’s report further provides a region-by-region and state-by-state breakdown. The Northeast and Mid-Atlantic region (from Virginia to Maine) has a rate of 27 percent, with Connecticut’s own just slightly higher at 29 percent. Connecticut, so far, has seen 4,470 properties re-default out of 15,586 permanent modifications.