A U.S. Treasury program aimed at preventing 3 million foreclosures is likely to fulfill less than a third of its goal, a congressional watchdog reported.
The Treasury’s homeowner aid effort is “ineffective” and has failed to hold mortgage companies accountable, the Congressional Oversight Panel for the Troubled Asset Relief Program said in a report released today.
“The program has turned out to be a lot smaller and have a lot less impact on the housing market than we expected,” said former U.S. Senator Ted Kaufman, the chairman of the panel.
The Home Affordable Modification Program, or HAMP, pays lenders and servicers to rewrite loan terms for borrowers who can’t make their current mortgage payments. Since its 2008 creation, HAMP’s goal of preventing 3 million to 4 million foreclosures “has been repeatedly redefined and watered down,” the panel said.
“If current trends hold, HAMP will prevent only 700,000 to 800,000 foreclosures,” a small portion of the 8 million to 13 million foreclosures expected by 2012, said Kaufman, a Democrat from Delaware.
The Treasury will spend only about a fourth of the $50 billion it allocated for the program in 2009, according to the Congressional Budget Office.
“For this reason, Treasury’s reluctance to acknowledge HAMP’s shortcomings has had real consequences,” the TARP panel found. “Absent a dramatic and unexpected increase in HAMP enrollment, many billions of dollars set aside for foreclosure mitigation may well be left unused. As a result, an untold number of borrowers may go without help.”
Homeowners are dropping out of the program at a faster rate than they’re joining it, the Treasury reported last month. The number of borrowers aided by HAMP grew to nearly 520,000 in October, up 23,750 from a month earlier, while 36,300 dropped out after failing to make their modified payments.