Alfreda Williams has been on the front lines for a long time, shepherding through some tough battles.
Williams is a senior foreclosure counselor for HomeFree-USA, one of the many agencies approved by the Department of Housing and Urban Development to help people save their homes if possible. Williams has seen the ugly side of the predatory mortgages that helped create the housing crash.
“The hardest thing for me is working with the older clients who have owned their homes for years,” Williams said. “Whoever did their mortgages took advantage of them. And there is no way for many of them to undo what was done to them.”
In response to the housing crisis and the onslaught of foreclosures, the federal government established the Making Home Affordable Program, which includes several strategies to help distressed homeowners. Recently, the National Consumer Law Center took a look at one of the largest of those strategies, the Home Affordable Modification Program, which began in 2009.
Under HAMP, borrowers can apply to have their monthly payments lowered to make them more affordable over the long term. Lenders and loan servicers don’t have to participate. But participating servicers are provided with financial incentives to modify loans to help avoid foreclosure.
Has the program been a success? Yes and no, says the law center.
Before HAMP, nearly half of all loan modifications failed, according to a recent report by the center. Now, more than 80 percent of the modifications negotiated under HAMP are still in place a year after they have been made. The modifications have also significantly lowered re-default and foreclosure rates compared with modifications made outside the program. Almost 850,000 homeowners have HAMP modifications that are working, the report says.
“For the people who got modifications, the program was outstandingly successful,” said Diane E. Thompson, an attorney with the law center. “Most would not have gotten modification without HAMP and they would not have gotten the deep and sustainable modifications they needed.”
Although the statistics are good, it’s still not enough when you compare it to the projected number of borrowers the administration thought it could help.
“When you look at who needed modifications and who didn’t get them or how difficult it was to get a one, the program is a failure,” Thompson said.
The law center concluded that HAMP would be more successful were it not for “massive servicer noncompliance.”
“The assumption is that there are a lot more homeowners who could be helped and lenders could benefit if they did more modifications,” said Raymond A. Skinner, Maryland’s secretary of housing and community development. “[The Obama administration’s] approach has been to encourage lenders to do it voluntarily. Some people here believe lenders are holding back in the hopes the government will put a lot more money in it, essentially bailing them out again.”
Skinner said many mortgage servicers just didn’t want to do modifications.
Even so, Skinner said that in Maryland, the program has rescued a lot of homeowners from foreclosure. Maryland had the eighth-highest level of HAMP modifications in the nation. Maryland’s success has been in part because of its public awareness programs and a good network of nonprofit housing counseling groups, Skinner said.
The law center suggests that to reach more homeowners, the program should standardize evaluations used to determine if a mortgage can be modified, ensure that modifications are truly affordable, require more transparency in the process, and force servicers to take part.
“Foreclosures are not going to go away,” Thompson said. “We really need to make this work. We are not talking about giving people something for free. But when it makes economic sense for the borrower, lender, or investor to modify a loan, we should.”
Nearly 4 million homeowners have lost their homes due to foreclosure, and up to 10 million homes are at high risk for foreclosure over the next several years, according to the law center. HAMP is scheduled to end on Dec. 31.
“Honestly, we need another two or three years,” Williams said. “I see some light. But I also see a lot of room for improvement in the program. I know we can’t help everybody, but I also know there are a lot of people we can still help.”