Modifying the Modification Program (HAMP)

The administration last week announced changes to its Home Affordable Modification Program (HAMP) after falling short of its goals of staving off foreclosures by way of mortgage modifications, with some saying the program has actually hurt the economic recovery because it only prolongs, in some cases, the inevitable foreclosure

That being said, the changes are largely good, and can better turn temporary loan modifications into permanents ones through better documentation and guidance. Though the one thing that most housing experts agree on is missing: principal reduction.

As of the end of 2009, roughly 110,000 loans had been permanently modified (and 900,000 trial modifications) since the $75 billion program went into effect in spring 2009, a number that was likely boosted late in the year by the administration’s requirement to place trial modifications in temporary review period “to ensure that all borrowers are being fairly evaluated for the program.” During that review period, banks were not allowed cancel HAMP modifications “for any reason other than failure to meet the HAMP property eligibility requirements.” Up until December, the number of permanent modifications had hovered at a significantly lower level — under 50,000.

But the one thing that banks had been hesitant to do is still not in the picture. Principal reduction, according to Barry Zigas, a Shelterforce contributor and director of housing policy for the Consumer Federation of America, “principal modifications are emerging as the key variable in creating lasting, stable mortgage modifications.”

The changes could, however, lead to good news for homeowners and for HAMP, Zigas writes, simply by getting rid of the some of the red tape during the process, and conducting various verification procedures at the outset, rather than while a homeowner is under trial modification:

“The loan mod program has been plagued by long start up times, confusion and lost paperwork as lenders try to scale up parallel underwriting practices in their servicing shops. One contributor to these delays have been documentation requirements that were adopted to prevent fraud, but seem to have been more effective in preventing legitimate modifications. Streamlining of required documents and quicker acceptance of initial qualifying material would be a big help in reducing the paper chase that has frustrated so many borrowers.”

Matthew Brian Hersh served as senior editor at Shelterforce from March 2008 to October 2012. He studied English at Rutgers University and has spent his professional career in journalism, policy, and politics.


  1. I am hopeful that someone could provide a bit of insight to the order that I have heard from a growing number of households who are in the final stages of the HAMP program that they have become delinquent on their mortgages due to the temporary payment period and now not only do they have to make up the escrow that was not paid during the trial period, their credit is ruined, and the principal is barely reduced. Any insight or guidance I can attempt to offer these families?


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