Home Affordable Modification Program, or HAMP, was introduced in early 2009 and is the administration’s primary foreclosure prevention program. This was designed to provide loan modifications to help struggling homeowners stay in their homes. Mortgage payments paid by the borrower were to be reduced according to income levels and hardship factors.
When it was introduced, HAMP was allocated a $50 billion budget to facilitate loan modifications by paying incentives to servicers, investors, and homeowners. Only a measly $1.6 billion in subsidies have actually been paid to this point, underlining the ineffectiveness and seeming intention to not actually help borrowers.
Government supervision and oversight of HAMP had been laughable and almost nonexistent. ProPublica, a non-profit investigative organization, through Freedom of Information Act requests, has obtained government audit reports of GMAC, the nation’s 5th largest mortgage servicer. These reports showed that the company operated with impunity and zero oversight for the program’s initial 8 months. When auditors finally conducted a major review more than a year into the program, they found that GMAC had seriously mishandled many loan modifications, miscalculating homeowner income in more than 80% of audited cases.
ProPublica has sought the audits of 10 of the largest program participants, but the Treasury Dept. only released GMAC’s because the mortgage servicer consented to the release. Abuses of the foreclosure process, from robo-stamping and forgeries, to creating false documents to force the borrowers out of their homes have been extensively documented, along with fumbling in government to regulate the programs they created. The biggest failure to date is the fact that most of the incompetence, fraud, and lack of oversight occurred just as the vast majority of homeowners, approximately 3 million, were being evaluated by servicers for the HAMP modifications. HAMP was intended to help 3-4 million homeowners, but fewer than 800,000 have received a loan modification. In many cases, the reduction in monthly payment is negligible and ineffective.
The massive failures of HAMP have paved the way for HAFA, which in part qualifies homeowners as being a participant in HAMP’s trial payments and not succeeding. Banks and servicers are under such intense scrutiny now that they are often willing, cooperative participants in HAFA and want to save some face and act like the good guy again. HAFA is NOT a loan modification program; it’s most successful arm is the loan extinguishment through short sale program. This allows the homeowner to short sell the property and walk away without a foreclosure on record.
Through HAFA, the participating 1st mortgage holder must release the lien and not file any deficiency judgments or recourse rights directed at the homeowner, and the homeowner is provided with up to $3,000 at close for relocation assistance. Successful state funding programs such as Nevada’s “Hardest Hit Fund” also provide additional mortgage relief to homeowners who were victimized by HAMP. If there is a 2nd mortgage, such as a HELOC, then that lien can be negotiated to satisfaction and release as well, including a max $16,500 payoff from the state fund (to participating servicers) with no further seller obligation or liability. This scenario is beneficial for many homeowners in Nevada today- many simply aren’t aware of it. HAFA and state programs that provide the homeowner funds at close are the Fed’s “make-up calls” for HAMP, and have had measurable success thus far.
Some HAMP/ProPublica info provided by Las Vegas Sun, 10/10/11