Government Mortgage Assistance Mostly Failing, Reports Show

By Kyle Chezum Updated on 3/3/2011

While the Obama Administration’s Home Affordable Modification Program, colloquially known as HAMP, has met with success to the tune of 600,000 permanently modified mortgages as reported by the Treasury Department, new information shows that the program has had far less effect than originally hoped.  The Treasury’s “600,000” figure doesn’t take into account the more than 800,000 attempted modifications that have failed through the program.

In addition, permanent modifications last for just five years.  The economy, and the housing sector in particular, will likely continue to struggle for longer than this, making five years an all-too-brief opportunity for underwater homeowners to get back on their feet financially.  With unemployment still high, it’s unlikely that even the lucky recipients of these modifications will see much success in the coming years due to such structural constraints.

Almost 70,000 of these permanent modifications have been cancelled, which doesn’t paint an optimistic picture for those homeowners who have managed to keep their spots thus far.  The other failed modifications consist entirely of “trial mods,” of which hundreds of thousands have failed.

The Treasury Department has had to drastically alter the spoken mission of the program.  Initially, officials claimed HAMP would modify millions of mortgages for underwater homeowners and turn the housing sector around for the better.  Today, officials state that the goal of HAMP is to make life a bit easier for a percentage of homeowners facing foreclosure, thereby lessening the foreclosure blow to the housing sector.

"By setting affordability standards and developing a framework for how mortgage servicers provide assistance to struggling families, HAMP has established critical protections for homeowners and has catalyzed improvements in modifications industry-wide,” a Treasury official said.  This is all well and good.  But this stark change in the program’s mission hints at something officials are seemingly trying to avoid stating.  HAMP has failed.  At the expense of taxpayers, the government’s mortgage modification program has been almost entirely unsuccessful.  Whether this trend will change in the future remains to be seen.