“The re-defaults signal the worst form of failure of the HAMP program: billions of taxpayer dollars will have been spent to delay rather than prevent foreclosures,” the report said, referring to the Obama administration’s $75 billion Home Affordable Modification Program.
“When the total picture of HAMP is taken into account, low conversion rates plus potentially high redefault rates mean that the total number of sustainable, permanent modifications generated by HAMP will be quite limited,” the report said.
The problem is simple: house prices have not yet reached bottom, banks don’t want to modify loans when value can’t be ascertained, banks don’t want to report very large losses on their loan portfolios, 25% of homes are underwater and unemployed homeowners have little chance of remaining current on whatever mortgage they’ve got.
The solution is also simple: allow bankruptcy court judges to reduce principal and modify loan terms, thus forcing the banks to make deals and recognize losses.
The solution’s already been turned down twice in Congress, so we’ll just have to wait another year or two until prices hit bottom and/or the economy begins to recover.
Gorilla says: “Time to tamp down the HAMP!”