Here’s an update on the gubment’s Home Affordable Modification Program (HAMP) mortgage rescue gambit that, according to this Washington Post report, is set to make all sorts of different headlines in the period ahead as interest rates on the modified loans rise.
Recall that this program did a terrific job at keeping mortgage payments flowing to troubled banks a few years ago but, all it really did for borrowers was to keep them from drowning any faster in debt that many of them could never, realistically, repay.
Five years after the federal government bailed out more than 1 million struggling homeowners, many who got the relief may end up losing their homes after all.
Already, nearly 30 percent of those who qualified for relief have defaulted again. And roughly 800,000 borrowers who remain enrolled in the government’s flagship program will see their mortgage interest rates gradually rise starting this year — eventually increasing payments by more than $1,000 a month in some cases, according to a recent federal analysis.
As the higher payments kick in, regulators and consumer advocates fear that homeowners won’t be able to stay current on their mortgages, placing an unwelcome strain on the housing market and potentially on economic growth.
“The program was a temporary Band-Aid,” said Greg McBride, a senior financial analyst at Bankrate.com. “Five years later, that Band-Aid is going to be ripped off.”
Obama administration officials defend the . But they say they are prepared to respond if there is a significant uptick in delinquencies among the homeowners.
Here’s the chart that shows how the program was doomed to failure from this item last year:
From the early days of the program, also see:
• Mar 2010 – The New Road to Serfdom – Part 63
• Apr 2010 – The Government’s Loan Mod Bizarro World
• May 2010 – HAMP Back-End DTIs Are Getting Ridiculous
• Jul 2010 – Another Way to Look at HAMP
• Feb 2011 – Loan Modification Data in Need of a Pie Chart