Calling HAMP the flagship program is a bit of a joke since it’s been a failure since day 1.
From the Washington Post:
Five years after the federal government bailed out more than 1 million struggling homeowners, many who got the relief may end up losing their homes after all.
Already, nearly 30 percent of those who qualified for relief have defaulted again. And roughly 800,000 borrowers who remain enrolled in the government’s flagship program will see their mortgage interest rates gradually rise starting this year — eventually increasing payments by more than $1,000 a month in some cases, according to a recent federal analysis.
As the higher payments kick in, regulators and consumer advocates fear that homeowners won’t be able to stay current on their mortgages, placing an unwelcome strain on the housing market and potentially on economic growth.
“The program was a temporary Band-Aid,” said Greg McBride, a senior financial analyst at Bankrate.com. “Five years later, that Band-Aid is going to be ripped off.”
The initiative was based on the flawed assumption that the economy would bounce back more quickly, undoing the damage wrought by plunging home prices and high unemployment. The program lowered the monthly mortgage payments of qualified borrowers for five years, presumably long enough for them to regain their financial footing.
But since the initiative’s launch in 2009, the average household income has been flat for all but the highest earners. And while home prices have climbed in the past two years, many borrowers continue to owe more on their mortgages than their homes are worth, making it difficult to sell their properties or refinance their way out of trouble.
Obama administration officials defend the Home Affordable Modification Program (HAMP). But they say they are prepared to respond if there is a significant uptick in delinquencies among the homeowners.
The outcome could determine how far the administration is willing to go on behalf of homeowners, experts tracking the issue said. Funding for the initiative came from the $700 billion that the Treasury Department used to bail out banks and other firms considered vital to the nation’s financial stability.
“The question becomes: Will Treasury help them get back on their feet in the same way it helped the banks get back on their feet?” said Christy Romero, the special inspector general for the Troubled Asset Relief Program, which oversees the handling of the bailout money.