The U.S. housing market all but collapsed in 2009 because of an avalanche of foreclosures. People with subprime mortgages found they couldn't make the payments when rates reset. Even people with prime mortgages found they were unable to keep up when they lost their jobs.
In response, the Treasury Department created the Home Affordable Modification Program (HAMP) to help homeowners avoid preventable foreclosures by encouraging servicers to modify mortgages to reduce monthly payments to sustainable levels. When it passed a stimulus bill, Congress specifically directed the Secretary of the Treasury to “maximize assistance for homeowners.”
But the modification process had problems from the start. Many homeowners, regardless of the mortgage servicer they were working with, complained of getting the runaround, being asked to submit the same documents over and over, only to learn that their homes were already in foreclosure.
Now there is more distressing news. Even many of those homeowners who successfully navigated the obstacles to a mortgage modification are in trouble. At a time when the housing market is generally accepted to be in a robust recovery, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has issued a warning.
“SIGTARP is concerned that the number of homeowners who have re-defaulted on permanent mortgage modification under TARP’s signature housing support program, HAMP, is increasing at an alarming rate,” the Inspector General said in a new report.
After four years only 862,279 remain in a HAMP permanent modification. As of March 31, 2013, more than 312,000 homeowners have re-defaulted on their HAMP permanent modification, according to the report.
Jumping though hoops
While the headlines proclaim a housing recovery, some homeowners are still jumping through modification hoops.
“We had a loan modification in place with Chase, then they sold it to Ocwenand several months later, the amount went up by $400,” Vera, of Chicago, wrote in a ConsumerAffairs post. “We are attempting to be remodified and everything we send to them is not legible or they never get it. They set up appointments and when you hang up, they say everything is fine, we got all the info.
"Then one week later, you get a letter saying everything is NOT fine, and you have a week to get the info (and in some cases additional info) that you just sent to them via email to them or else you jeopardize the re-modification. HAMP, this is disgraceful. If they are working in cooperation with you, you need to know that people are being given the runaround,” Vera said.
Vincent, of San Francisco, said he has been attempting to modify his Bank of America mortgage through HAMP for nearly four years.
“I first applied for a modification in December of 2009,” Vincent writes. “Since that time I have sent in countless HAMP applications; tax returns; bank statements; lease agreements; P & L Statements; utility bills; paycheck stubs for seasonal jobs; HOA statements; hardship letters and so on, whenever they requested. My file has been with more underwriters than I can even recall. Although this has been the most stressful four years of my entire adult life I refuse to let them abuse the $700 billion that are coming from our tax dollars, and not be able to reap the benefits."
In fact, the reports ConsumerAffairs receives from homeowners who are now trying to modify their mortgages are little different from the ones we received in 2010 and 2011. Take Angela, of Omaha, Neb., for example.
“We had our mortgage through Litton,” she writes. “We began calling, requesting a loan modification for our mortgage. We were told to fax various types of information -- tax returns, pay stubs, etc. This was faxed a minimum for four times and every time we were advised the forms were never received. We placed call, after call, after call only to be put off and told that 'Diane' who was handling our case would call us back. This continued for months which resulted in the foreclosure of our home.”
As of March 31, 2013, the U.S. government had spent $7.3 billion on housing support programs, including $4.3 billion on HAMP. But the Treasury Department’s own data indicate that the number of HAMP permanent modifications that re-default is rising.
As of March 31, 2013, the oldest HAMP permanent modifications, finalized in the third and fourth quarters of 2009, are re-defaulting at a rate of 46.1% and 39.1%, respectively.