The HAMP program promised to relieve three to four million homeowners in America and over a year into the program, barely half a million have actually seen aid. US Treasury Secretary Tim Geithner confirms that the original goal will not be met.
HAMP has spent $840 million of the $29 billion of Troubled Asset Relief Program (TARP) funds with most of the housing programs in TARP not aimed to recover funds, rather acts as a crutch to struggling homeowners.
The goal of helping the struggle of the homeowner is a noble cause, but the programs in place are ineffective, even according to those who helped design them and have failed. The US House of Representatives Financial Services Committees is scheduled to vote next week to kill the programs as the cost can no longer be justified. There will be a subcommittee hearing on the programs on March 2 and an amendment and voting session on the termination bills on March 3.
The programs have failed, now what?
Not one to give up on an agenda, Obama has a new plan already in the works as his old plan gets the guillotine. Obama wants loan servicers to commit to reducing loan balances for underwater borrowers with the costs not carried by investors who bought mortgage-backed securities.
The idea is that this would force the worst offenders of foreclosure blunders to take the loss by writing down the loans they serviced on behalf of Fannie Mae and Freddie Mac. In essence, the Administration is asking loan servicers to come up with their own mortgage modification programs.
If addition, several state attorneys general have claimed they are pushing for loan servicers (particularly the largest) to pay over $20 billion in civil fines based on their bad behavior. These fines would go toward funding local loan modification programs.
Is that really the fix?
So HAMP and other programs fail miserably. Obama tells the banks they’ve been naughty and they need to come up with their own programs and reduce principle on underwater borrowers. Attorneys general tell the bank they’ve been naughty and they’re going to punish them and the fines will go toward the people the bank most wronged.
It seems that the loan servicers failed at keeping their noses clean when the government was handing out free money, how will punishing them civilly or telling them to fix it themselves work if they couldn’t behave in the first place? The loan servicers couldn’t pull it together when the modification money was free, I can’t imagine how they’ll perform any better when they’re being politely asked by the Administration to pony up billions of their own money to help homeowners. This isn’t going to be pretty.
