Mortgage-Relief Program Slogs Ahead

Mortgage-Relief Program Slogs Ahead

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It appears that the Obama administration’s mortgage-relief program has been losing steam and will continue to slow down. According to a new report issued by the Treasury Department Friday, 48.1 percent of the 1.3 million homeowners who have enrolled in the Home Affordable Modification Program (HAMP), which make mortgages more affordable, have dropped out since March 2009. That means that about 630,000 people who tried to reduce their monthly mortgage payments through HAMP were cut loose, suggesting homeowners couldn’t sustain mortgages even with reduced payments.

"While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said HUD Assistant Secretary Raphael Bostic. "We know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation's hardest hit neighborhoods."

HAMP, which began in April 2009, enables qualifying homeowners to reduce payments to 31 percent of their income. More than one-third of participants have received permanent loan modifications and are making payments on time. "This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry – both of which are delivering real benefits to struggling homeowners in communities across the country," Treasury Assistant Secretary Herb Allison said in a statement defending the program.

The report also said July housing prices remained level after 30 straight months of decline. Foreclosure completions also inched upward as the volume of serious delinquencies continues to work through the pipeline, according to the report.

These numbers are not surprising, says Rick Sharga of, a website that tracks foreclosures. “I don’t think the slowdown in foreclosure starts is from an improvement in economic conditions; it’s just that lenders and servicers are managing inventory levels,” he said. 

The silver lining in the monthly report is that HAMP has succeeded in delaying foreclosures, says Karen Dynan, vice president of the Economic Studies Program at the Brookings Institution. “If we had these foreclosures all at once we could have seen a bigger plunge in the housing market and it would have been harder for the economy to weather,” Dynan said.

But Sharga says HAMP may be delaying foreclosures but not preventing them, as was intended. “I’m not sure delaying the inevitable is doing us much good. It could reduce the severity of the problem right now,” he said.

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