Obama’s mortgage modification program: on its way out?

Could the Obama Administration’s program to help American homeowners stay afloat be nearing the end of its usefulness? A committee of Washington Republicans assigned to oversee White House programs says this could be the case.

Soon after it became obvious that a major national financial crisis was looming on the horizon, the Obama Administration launched its Home Affordable Modification Program (HAMP), offering mortgage lenders financial incentive to restructure their customers’ payment plans. Although optimists predicted this program would stem the tide of sub-prime mortgage failures, it only ended up being temporarily effective: confusing paperwork, uninformed staffs, and poorly organized processes hopelessly confounded a large number of participants, many of whom ultimately failed to acquire long-term mortgage modification.

Newly elected Republican officials are expected to study and scrutinize many of the President’s recession-protection strategies, and thanks to its less-than-stellar performance, HAMP will probably make an easy target. “This program seems to have outlived its usefulness,” stated Darell Issa of the House Oversight and Government Reform Committee. In Issa’s opinion, the incentive program is yet another example of superfluous government intervention.

This allegation is not entirely without basis in reality. Although hopes ran high for HAMP, in truth the entire program was rushed and poorly planned from the beginning. Of the 500,000 homeowners granted temporary mortgage modifications under HAMP, only a miniscule fraction was approved for permanent modifications. In the long run, this left many further behind on their mortgage than they began.

Additionally, recent unemployment rates have been less than conducive for HAMP’s success. In recent years it has become impossible for much of the country to attain income levels capable of handling modified mortgages, let alone unadjusted ones.

The fact that HAMP has been associated with the robo-signing controversy only compounds problems. Republicans now blame Democratic regulators for not paying close enough attention to the foreclosure industry.  Representative Robert Goodlatte is quoted in a recent hearing on Capitol Hill as demanding Democrats to “explain how the OCC [the agency in charge of overseeing the activity of America’s largest banks] …failed to detect that there were foreclosure documentation issues well before this turned into a crisis.”

Julie Williams, Chief counsel for the OCC, had little to say in response: “In hindsight, if we think about the volume of transactions that were going through the process, we could have been more suspicious.”