Thursday, January 21, 2010

Heckuva Job

I'm reasonably sure Obama and (some in) the administration wanted HAMP to work, though I'm not sure why they thought it would.

"More troubling, more than 70 percent of modifications result in an increase in the principal amount owed," according to the report by the State Foreclosure Prevention Working Group, a collection of 12 state attorneys general and three state banking supervisors (underlined in the original). This occurs because modification programs typically allow for mortgage companies to tack on delinquent amounts and any fees incurred by servicing to the mortgage principal. The Obama administration's signature effort, the Home Affordable Modification Program, allows for this, too.

This occurs despite estimates that at least one in four homeowners currently owe more on their home than it's worth. Loan modification programs thus put these homeowners further "underwater." Less than 10 percent of loan modifications through October of last year involved significant cuts to principal.