More than one-quarter of the mortgages modified under the Obama administration’s signature homeowner rescue effort — known as the Home Affordable Modification Program, or HAMP — have re-defaulted, and re-default rates are rising, according to a report released July 24, 2013.
The report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the watchdog for the federal aid effort, said that “the longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program.” To back up this claim, the report points out that 46 percent of struggling borrowers who received a loan modification in 2009 — the oldest HAMP modifications — have re-defaulted.
“Homeowners with HAMP modifications from 2009 are re-defaulting at an alarming rate of 46 percent, 38 percent for 2010 modifications,” wrote Christy L. Romero, the special inspector general for SIGTARP in the 408-page report.
The HAMP program, which was launched in 2009 by the Treasury Department, aimed to assist 4 million struggling borrowers avoid foreclosure by making their payments more affordable through reduced interest rates, extended loan terms or, in some cases, reduced mortgage principals. While HAMP has helped about 865,100 homeowners avoid foreclosure over the lifetime of the program through permanent loan modifications, more than 306,000 homeowners have re-defaulted on their modified mortgages as of the end of April — a 26 percent cumulative re-default rate.
The re-defaults have cost taxpayers some $815 million, according to SIGTARP.
The Treasury has set aside $38.5 billion of its Troubled Asset Relief Program (TARP) funds to pay for the HAMP program So far, the Treasury Department has allocated $19.1 billion to HAMP, and $4.4 billion has been spent.
Despite its problems, the government has extended the HAMP program for another two years, until 2015.