HAMP’s False Promises: Administration Admits That So Far, It’s a Failed Program

02 Dec HAMP’s False Promises: Administration Admits That So Far, It’s a Failed Program

The $75 billion HAMP program designed to induce mortgage lenders to modify home mortgages owed by financially troubled homeowners isn’t working, and now the Obama administration has admitted as much. Due to recent coverage of the HAMP program’s failures by major media outlets, public awareness of the issue has been rising. This could be good news for homeowners on the edge, but none of them should hold their breath waiting for help.

In a November 30, 2009, story appearing in the New York Times, Peter S. Goodman reported that out of 650,000 homeowners who had been offered “trial modification” of their mortgages, fewer than 2,000 had been given permanent modifications. Originally, 3 to 4 million homeowners were to have been helped by the HAMP program.

Goodman quoted Senator Jeff Merkley, D-Ore., as expressing “frustration” with HAMP. “Very few people have emerged from the trial period,” said Merkley.

Alan Zibel of the Associated Press wrote about the HAMP program on December 1, 2009, saying that the Obama administration plans to pressure mortgage servicers into extending real modifications to homeowners in trouble. However, Zibel’s article quoted administration officials and mortgage industry spokespersons as blaming homeowners for HAMP’s shortcomings. In their view, homeowners had failed to submit required documentation to the mortgage servicers, who then had no choice but to deny the requested modifications.

None of the sources referred to here discussed what could be the real reason for the astonishingly small number of modified mortgages: most mortgages owed on the homes of American consumers are owned by securitized trusts. The trustees of these trusts may lack the authority to compromise on the amounts due under the terms of the mortgages. Having no authority to modify these mortgages, none are being modified. Instead, meaningless “trial modifications” are being offered as window dressing. Thankfully, the real story is beginning to emerge.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.
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