The centerpiece of the Obama administration's foreclosure mitigation policies is failing. Republicans and Democrats in Congress both readily acknowledge the effort, called the Home Affordable Modification Program (HAMP), is a boondoggle of a government program. The only entity that won't face the facts is the Department of the Treasury, which runs the program and has been desperate to hide the program's poor performance.
HAMP modifications start with a three-month trial, then -- if the program's one-size-fits-all conditions are met -- become permanent. The problem for Treasury is that more than two-thirds of homeowners in the program never make it into permanent modifications. Treasury initially promised that HAMP would "reach up to 3 to 4 million at-risk homeowners" and reduce their monthly payments to "sustainable" levels. But the most recent progress report, released last week, shows only 170,207 permanent modifications. At best, that's six percent of Treasury's goal.
By anyone's standard, a six percent success rate is a pathetic result, and only underscores that the reality of HAMP is far from the promise.
But instead of fixing its program, Treasury is trying to move the goal posts -- by counting the program's 1.3 million offers of temporary modifications as an indicator of success. At last month's hearing before our Committee, the head of Treasury's Homeownership Preservation Office, Phyllis Caldwell told skeptical members of Congress that "the program was designed to offer three to four [million] homeowners an opportunity for a mortgage modification - not a permanent modification, an opportunity."
Treasury's revisionism makes little sense, except as cover for another massively expensive, failing government program. It's clear that the initial promise of 3 to 4 million "sustainable" mortgage modifications was referring to permanent, not temporary, fixes -- to suggest otherwise is an assault on common sense and insults every American facing foreclosure and seeking permanent relief through this program. To pretend that temporary modifications count toward HAMP's target number glosses over the costly toll exacted on those who find false hope in the promise of HAMP.
These cash-strapped homeowners are sending mortgage payments to banks in a desperate effort to avoid foreclosure -- believing that temporary assistance will lead to permanent mortgage modifications to keep them in their homes. The sad fact is that the HAMP mortgage modification plan, in most cases, won't ultimately grant them the permanent modification enrollees believe they're on track to receive. This only delays foreclosure -- but doesn't prevent it -- and these homeowners wind up wasting their mortgage payments. It's cynical for Treasury to log progress toward its goal of preventing "3 to 4 million" foreclosures by counting homeowners who might actually be worse off, thanks to HAMP.
As a program, HAMP has chronically underperformed in almost every metric. The facts are clear, even if Treasury's report is not. The Obama administration needs to focus on helping families find ways to weather troubled times and stay in homes they can afford instead of finding ways to mask the program's failure.
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