Are The Low Numbers Of HAMP An Indication Of Its End?

Lauded by many to be the answer to the housing market crisis and a catalyst to stimulate the economy, the Home Affordable Modification plan has failed to deliver what it had assured.

Developed to assist those who started to have difficulties in repaying their mortgage because of the economic crisis, HAMP was supposed to reduce the number of foreclosures by making the every month loan re-payments a lot more affordable.

HAMP has not been nearly as popular as expected though and of the three to four million homes which were expected to benefit from the program, it seems a lot more likely that the figure will not reach 1 million with some estimates placed at only 400,000 homes benefiting from the incentive, that is less than 1 p.c of all first mortgages in the US

Is seems as though the criteria to be eligible for HAMP means that less individuals are able to take advantage than was initially predicted. Below are the criteria required to qualify for the modification program:

• The loans must be have been taken before January 1, 2009
• The properties on which the modification is required must be occupied by the owner
• Outstanding loan balances should be below the expanded conforming limit
• The borrowers' front-end debt-to-income ratios should be greater than 31%

What is more is that the owners has to be currently delinquent on their loans or deemed to be imminently delinquent by the lender in order to qualify for HAMP.

When all of these statistics are taken into consideration one by one, it appears as though a lot fewer actually qualify than previously thought. This means that billions of dollars have been ploughed into a system which will assist a really small minority of homeowners.

Individuals also criticize HAMP saying it does not help in the long run Rather, many believe that it just delays the inevitable because those who have lost an income still cannot meet the new modified payments.

One requirement of the HAMP program is that those obtaining a modification undergo a 3 month period in which they must meet all adjusted payments and submit all relevant documents so as to make the adjustment permanent. Up until the modification is made permanent, the borrower is even now considered to be delinquent and out of every 100 HAMP modifications trialed, about 20 will be made permanent. Of all trials granted a massive 29% didn’t pay the modified amount as agreed whereas many who did pay were unable to submit the required documents.

There are plans to modify HAMP to help solve its shortcomings though and various alterations to its policies are being mooted. One such policy is principal forgiveness that means asking the bank to cut the principal on mortgages to make it a lot more affordable and encourage more home owners to comply with the program during the trial period and beyond. Ideas like this though are not likely to be welcomed by lenders, meaning that the government will be expected to provide a lot more cash incentives to encourage the banks to comply.
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