Reviewing the Home Affordable Program and What Changes Are Coming in 2011
As we have already discussed in a previous article, there is the possibility of new changes to come to the government’s loan modification program HAMP. The next chairman for the House Oversight and Government Operations Committee wants to take a look at the nearly $30 billion committed to the HAMP program and use the money to help borrowers who failed at getting approved for a loan modification. There probably is a good reason why some people have failed and simply do not belong in the house any longer.
Right now residential servicers of mortgages like American Home Mortgage Servicing or AHMSI have already been paid nearly $700 billion in incentives as part of the approval process for the HAMP program. As long as the homeowner makes their mortgage payment on time, the servicer gets $1000 on annual successful payments up to five years. The homeowner gets a slight reduction in their principal balance estimated around $80 a month for as long as they stay current on the mortgage over the next five years. See the Making Home Affordable website for further details.
That seems a little backwards to me; if anything, the homeowners should be the ones getting a better incentive to stay in their homes by forcing investors to do a principal reduction, but that is just merely my opinion. We see different opinions about the government’s involvement and if the HAMP and MHA programs are really working. Being on the forefront of the loan modification myself and seeing loan modification request from all walks of life, I would have to say that, in the beginning, most of the people looking for assistance really needed it, but now I believe more people are not in need of the assistance but want a reduction in their principal and feel it is justified. That is not the case though.
Representative Darryl Issa of California will be overseeing the TARP or Troubled Asset Recovery Program coming this January 2011. He intends to do extensive oversight hearings to see how to better assist the millions still facing foreclosure. TARP funds the loan modification program Home Affordable and according to the California Republican Issa, the program didn’t start out the right way to begin with, and it is not evident whether it has actually worked.