Has the Government’s HAMP Program Been a Failure?

by Peter Thomas Ricci

The government’s Home Affordable Modification Program, or HAMP, received a stinging report from the inspector general of TARP that questioned its merits.


The government’s Home Affordable Modification Program, or HAMP, was among its major responses to the housing downturn, and though roughly 860,000 homeowners have modified their mortgages through the program, a new watchdog report has cast serious doubts on its long-term effects.

According to a new analysis by the inspector general for the Troubled Asset Relief Program (the program that was created back in 2008 to oversee the government’s various economic emergency measures), 46 percent of the permanent modifications made in 2009’s third quarter re-defaulted, and permanent modification in 2010 did not fair much better, with re-default rates ranging from 28.9 percent to 37.6 percent.

Though HAMP modifications, by other projections, perform better than private modifications, the report was stark in its conclusions.

“The number of homeowners who have redefaulted on a HAMP permanent mortgage modification is increasing at an alarming rate,” the report said. “Treasury’s data shows that the longer a homeowner remains in HAMP, the more likely he or she is to re-default out of the program.”

HAMP & HARP – A Tale of Two Government Housing Programs

As the Wall Street Journal noted in a recent article, this is not the first time that HARP has attracted scrutiny from analysts. When HAMP originally launched, officials required huge amounts of documentation from homebuyers looking to modify their loans, creating a frustrating system of finger-pointing between banks and homeowners, where banks claimed that forms were incomplete and homeowners claimed banks were losing their paperwork. And then there were the constant changes to HAMP’s requirements, which made it difficult for banks to accomodate homeowners.

Of course, not all of the government’s housing programs have encountered such difficulties. The Home Affordable Refinance Program, for instance, was just extended for its second time, such has been its success with homeowners. Though the program, similar to HAMP, got off to a bumpy start when it was launched in 2009, the government made several key modifications to the program’s requirements in late 2011, and the newly dubbed “HARP 2.0” flourished, with more than one million homeowners successfully refinancing their mortgages in 2012; for comparisons sake, that’s the same amount of homeowners who had refinanced in the first three years of HARP from 2009 thru 2011.

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