The Obama Administration’s Home Affordable Modification Program, which marked its fourth year last month, has surpassed 2 million mortgage-reduction trials initiated, according to the latest update released Friday.
But out of the 2,000,224 three-month trials launched, 43 percent — or 862,636 — “active permanent modifications” remain through February of this year, according to the latest report from Treasury and HUD officials.
Each modification represents a household at least 60 days delinquent on its mortgages, with eligibility expanded last year to include more flexible debt-to-income requirements, tenant-occupied properties or vacant homes that the borrower intends to rent.
The mortgage reduction campaign, more commonly known as HAMP or Making Home Affordable, has saved, on average, about $546 in monthly mortgage payments, and an estimated $18.5 billion to date, housing officials say.
However, HAMP has received its share of criticism, mostly for being too lax for too long with under-performing mortgage servicers who put homeowners through documentation ordeals and processing delays.
HAMP, which is set to expire on Dec. 31, has also come under fire from consumer advocates, congressional watchdogs and lawmakers for missing its initial goal of assisting up to 4 million borrowers.
Nonetheless, prominent national and state consumer groups sent a letter to Treasury Secretary Jacob Lew on March 26 urging him to “extend this important foreclosure prevention program.”
Why do homeowner advocates support renewing HAMP, despite its lackluster performance when taking into account the extent of the foreclosure crisis?
The answer: HAMP modifications perform better than non-HAMP programs offered by most lenders.
The monthly payment reductions are greater under HAMP, which is driven by lender incentives and is funded by the Troubled Asset Relief Program (TARP), the primary U.S. bailout vehicle.
“HAMP modifications remain clearly superior to proprietary modifications across every dimension,” reads the letter from consumer advocates. “Looking at the most recent quarter for which data are available, the third quarter of 2012, over three – quarters of HAMP modifications had monthly payment reductions of greater than 20%, while less than half of proprietary modifications did.”
Moreover, HAMP has a better track record.
The letter to Lew: “For example, only 14% of HAMP modifications completed in the third quarter of 2011 were 60 days or more delinquent 12 months later, compared with 27% of proprietary modifications — and of those completed in the fourth quarter of 2011, only 11% of HAMP modifications were delinquent 9 months later, compared with 24% of proprietary modifications.”
The long list of prominent consumer organizations hopes that the new Treasury Secretary not only extends the program but hopes that HAMP “could expand and improve in future years in order to maximize its impact for families most in need.”
Here are the groups that signed the letter to Lew:
Americans for Financial Reform
Center for Responsible Lending
Consumer Federation of America
EPACT Education Fund
National Association of Consumer Advocates
National Community Reinvestment Coalition
National Consumer Law Center (on behalf of its low-income clients)
National Fair Housing Alliance
National Housing Resource Center
National People’s Action
National Urban League
PICO National Network
The Leadership Conference on Civil and Human Rights
Community Legal Services (Philadelphia, PA)
Aspera Housing Inc. HUD # 80168
California Reinvestment Coalition
Center for NYC Neighborhoods
Community Housing Innovations, Inc. (New York)
Connecticut Fair Housing Center
Empire Justice Center (New York)
ESOP: Empowering and Strengthening Ohio’s People
JASA/Legal Services for the Elderly in Queens (Queens, NY)
Legal Services for the Elderly, Disabled or Disadvantaged of WNY, Inc. (Buffalo, NY)
Legal Services of Central New Y ork, Inc.
Long Island Housing Services, Inc.
MFY Legal Services, Inc. (New York)
New Jersey Citizen Action
New York Legal Assistance Group
Philadelphia Unemployment Project
The Financial Clinic (New York)
The Legal Aid Society (New York City)
The Mississippi Center for Justice
Westchester Residential Opportunities Inc. (White Plains, NY)
Western New York Law Center