Due to not getting the mortgage companies to voluntarily reduce the principal balances, HAMP is failing, as noted in an excellent story in The Huffington Post.
Reducing principal balance is, to agree to lower the total amount owed on a house, so that homeowners can avoid foreclosure. HAMP rarely does that.
What happened is, the mortgage companies took their foot off the gas last year when judicial mortgage modification was before Congress. Once they defeated that in the Senate, by saying they would do thing to avoid foreclosures, they embraced HAMP as the easy way out, and it was back to business as usual.
Mortgage companies told the politicians, hey, we are fixing the problem ourselves, no need to force us, that would mess up the mortgage market.
HAMP, of course, is voluntary.
And, of all things, the mortgage companies say to our leaders, watch that moral hazard, do not let people off the hook for the amount they agreed to pay for a house just because it went down in value!
Well, I am not sure how much money is left in the federal government moral hazard account, after the trillions our leaders spent guaranteeing and bailing out the mortgage companies who did, after all, make hundreds of thousands of bad loans.
But, did, after all, make lots and lots of campaign donations, to both parties.
Many of my clients tell me, they do everything the mortgage company asks for them to qualify under the HAMP program, only to have the rug pulled out from under them, usually after months, and be told they do not qualify after all.
The story of one such couple, who ended up owing MORE on their mortgage, $20,000 more is told by MSNBC.
As opposed to a principal reduction, that would have reduced everyone’s losses, including the precious banks who seem to run the country now.
Even the investors in the securitized trusts that actually own the mortgages have figured it out.
Quoting from the Huffington Post,
” . . . .Micah Green, a partner at Patton Boggs LLP, a Washington law firm that represents a mortgage-investor group of asset managers who hold more than $100 billion in residential mortgage-backed securities.
Without principal reductions, “there is a growing realization within the administration and on Capitol Hill that it’s very difficult to bottom out the housing market,” Green said.
“The interests of investors are totally aligned with those of homeowners,” he added. “Investors are willing to put money on the table and frankly take their losses, which they already have.”
Foreclosures continue to rise, there will be even more, house value continues to decline, making even more homes worth less than what is owed on them.
It says here, come summer, it will be impossible for the White House and our other leaders to deny that the crisis is worsening and the political fingers in the dyke will not prevent the dam from bursting.
HAMP Failing To Stem Foreclosures