Home Modifications and the Home ATM Resurgence

Home Modifications and the Home ATM Resurgence




The Treasuries Bail-Out Program called the Home Affordable Modification Program or HAMP has repeatedly been called a failure. It has been called a failure not only from inside the treasury by Neil Barofsky, who is the special inspector, for the treasury but also by numerous outside sources. Neil Barofsky has also spoken out against a number of other initiatives and poor decisions made by the treasury and the federal government. He is know for telling the truth in situations which put him under potentially harsh internal pressures. 1



The problems with HAMP are but are not limited to, software problems, constant changes in rules and processes. Owners were pressured into temporary modifications with the same total lack of documentation just like the original loans that created the problem. The result of influx of undocumented modifications was a dire backlog for scarce resources. 1



Bad underwriting followed by further bad underwriting creating even more problems for the people they were supposed to be helping in the first place. 1



The program was infused with 75 Billion dollars in TARP funding. The initial goal was to help 3-4 million families and individuals stay in their homes through modification of existing mortgages.1



The program is overseen by former Fannie Mae executive Herb Allison. Fannie Mae and Freddie Mac have both been bailed out and are mostly owned by the US Government. 1



Direct quote from the article below….

And then came Mr. Allison, who wanted to make sure we all understood that the original goal of the program was not to get 3-4 million borrowers into permanent mods but to offer 3-4 million trial modifications. He even cited some document where that was written.

Okay, semantics aside, I don't believe that was the initial message. I guess it just wouldn't sound too good for the President to stand up at a big rally in Cleveland and say, "Folks, we're going to take 75 billion of your hard earned dollars and try to keep 3-4 million troubled borrowers in their homes. And when we're done you're going to see that less than half of them actually succeeded!!!" 1



February foreclosure Rate of 3.31% a 51.1% increase year over year. 7.9 million loans are not current. The biggest change occurring seems to be that homeowners are less likely to pay their mortgage before their other bills. Many home owners are doing this because they are forced to BUT not all others are actually strategically paying their mortgage last. 2



So lets do some math 7.9 million home owners are not paying their mortgages. Lets assume the median home loan is $1000.00 a month that is 7.9 billion dollars available for consumer spending or to pay other bills every single month those homes stay in foreclosure and payments are not made. Another article estimated that half of consumer homeowners were using that money for other purposes giving us a total of roughly 3.95 billion in consumer spending moving directly into the economy.



In a case study a person with an $1880.00 monthly mortgage payment they defaulted on was actively spending their mortgage payment from their bank account. The spending was not on necessities; but included premium cable with additional charges for premium services, nail salon, tanning salons, liquor stores, shopping at the Gap, Old Navy, Home Depot, Sears and more. 2



Studies also show that if you know someone who has or had defaulted they are more likely to also default. It takes over a year to two years in some cases to be thrown out of your home. 2



Works Cited



1. Olick, Diana. “Treasury Confirms Underwater Help”. www.CNBC.com. Published: Thursday, 25 Mar 2010
3:23 PM ET.

http://www.cnbc.com/id/36039123



2. Olick, Diana. “Mortgage Defaults May Be Driving Consumer Spending”. www.CNBC.com. Monday, 12 Apr 2010
11:15 AM ET. http://www.cnbc.com/id/36422316