The U.S. House of Representatives is considering legislation that would terminate the Home Affordable Modification Program SM (HAMP SM) and deny critical assistance to struggling homeowners. During the debate over this issue, a number of pieces of misinformation have made their way through the halls of Congress and onto the airwaves. We want to set the record straight on a few key points and share five things that you may not know about HAMP.
Currently, about 25,000-30,000 additional homeowners receive a permanent HAMP modification every month. HAMP is continuing to provide critical assistance to struggling Americans who are trying to keep their homes. To date, more than 600,000 homeowners have received a permanent HAMP mortgage modification, and tens of thousands of additional Americans are joining their ranks each month. These homeowners benefit from a median reduction in their mortgage payments of 37 percent – or $500 every month.
HAMP provides assistance only to those homeowners who meet prudent eligibility criteria. HAMP wasn’t designed to prevent every foreclosure. The program does not pay for mortgage modifications for investment properties, vacant homes or jumbo loans. HAMP is not designed to help those who can afford to make reasonable payments on their existing mortgage, and it is not designed for those who are unlikely to sustain a modified mortgage even with government help.
Money only goes out the door if a homeowner demonstrates that they can make their modified mortgage payments. HAMP uses a “pay-for-success” model to protect the interests of taxpayers. Money is only spent after a homeowner completes a trial period and demonstrates that they can make their modified mortgage payments on time. As a result, terminating the program would simply deny assistance to homeowners who have successfully shown that they are determined to keep their homes and can meet their obligations.
HAMP modifications are outperforming industry norms.
Data has shown that HAMP modifications are among the most sustainable in the mortgage market. The Office of the Comptroller of the Currency reports that, for the financial institutions that they regulate, the re-default rate for HAMP permanent modifications at six months was about half that of other modifications.
Nearly 85 percent of homeowners who received a permanent HAMP modification remain in their modification one year later.
HAMP has created needed protections for homeowners seeking assistance from their mortgage company. HAMP established new safeguards for struggling homeowners. To ensure that homeowners have every opportunity to keep their homes, HAMP requires participating mortgage servicers to evaluate homeowners for a mortgage modification before referring them to a foreclosure sale. HAMP requires servicers to adhere to clear timelines when evaluating homeowners for HAMP modifications and established a process for homeowners to dispute their servicer’s decision when they believe that they have been unfairly denied a modification.
Before HAMP, there was little meaningful assistance available to struggling homeowners in the midst of the worst housing crisis in a generation. The program continues to help tens of thousands of additional homeowners every month, and it has set important standards for how the mortgage industry assists homeowners industry-wide. It is structured so that the amount of money spent will be proportionate to the number of people helped; any funds not used will pay down the national debt.
There is no easy way to repair the deep damage caused by the housing crisis. It will take time and sustained effort. But what’s clear is that terminating HAMP and denying critical assistance to struggling homeowners simply isn’t the answer.
Tim Massad is Acting Assistant Secretary of the Treasury for Financial Stability.