Today, U.S. Senators Jim DeMint (R-South Carolina) and Bob Corker (R-Tennessee), both members of the Senate Banking Committee, and Tom Coburn, M.D. (R-Oklahoma), a member of the Senate Finance Committee, introduced legislation to end the Housing Affordable Modification Program (HAMP).
The program was intended to help over 7 million homeowners modify their mortgages to avoid foreclosure. Instead, HAMP has only permanently modified just over half a million loans while leaving thousands of Americans worse off. A record 2.9 million homes were foreclosed on in 2010 with a projected 20% increase expected in 2011. In contrast, the Financial Services Roundtable reports that the private sector has completed nearly 9.8 million mortgage modifications since 2007, and over 1.2 million in 2010 alone.
Special Inspector General for the Troubled Asset Relief Program Neil Barofsky harshly criticized HAMP in Congressional testimony on March 2 stating that the program's "failed trial modifications often leave borrowers with more principal outstanding on their loans, less home equity, depleted savings, and worse credit scores." SIG Barofsky went on to say there is "near universal agreement that the program has failed to meet its goals" and concluded "there is little reason to hope things will get better."
"Congress should move swiftly to end the President's disastrous mortgage program. It has funneled millions of taxpayer dollars to big banks and Fannie Mae while taking struggling homeowners on a wild goose chase as foreclosures increase," said Senator DeMint. "My office has heard from numerous South Carolina families who went to HAMP for help, but after months of false promises and mountains of paperwork they were left in worse financial shape. HAMP is just the latest failure of President Obama's big government experiments. HAMP has not even reached ten percent of its intended goal of helping 7 million American homeowners modify their loans, but it has succeeded in pushing hundreds of thousands of other Americans closer to foreclosure and personal bankruptcy."
"Taxpayer dollars shouldn't have been used to finance loan modifications that the private sector is performing on its own far more successfully," said Senator Corker. "By almost every measure, the HAMP program has fallen short of its stated goals. Let's end this program and restore the private incentives that already exist to keep families in their homes."
"Like so many other big government programs, HAMP started with good intentions but has burdened homeowners and taxpayers," said Dr. Coburn. "The administration pledged to help three to four million homeowners facing foreclosure but have rejected more requests than they have accepted. In many cases, the program has done nothing but string along homeowners and increase their hardship. Instead of leading homeowners through a maze of regulations and forcing them to run a gauntlet of incompetence, the federal government should help taxpayers by reducing spending, beginning with the $50 billion dedicated to this failing program."
A January 2010 article about HAMP's failure in the New York Times, headlined "U.S. Loan Effort Is Seen as Adding to Housing Woes" stated that, "[D]esperate homeowners have sent payments to banks in often-futile efforts to keep their homes... Some borrowers have seen their credit tarnished while falsely assuming that involved no negative reports to credit agencies. Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system."
Under the program, more mortgage modifications have failed than been successful. Out of 1,466,500 temporary modifications, more than 792,500 have failed. That means HAMP has a failing rate of 54 percent.
"The real story here is that the free market is working where the government is failing," said Senator DeMint. "Private sector mortgage modifications successfully helped more than twice as many homeowners as HAMP last year, and nearly 10 million since 2007. It's time to stop HAMP from hurting more homeowners and allow the housing market to finally recover without the government picking winners and losers."