HAMP Fails To Achieve Objective – COP Report

In its latest Report running 189 pages dated 10th February – titled “Commercial Real Estate Losses and the Risk to Financial Stability” – The Congressional Oversight Panel, a “watchdog” committee overseeing the implementation and progress of Obama Government’s foreclosure crisis mitigation programs, has regretted the ineffectiveness of the same.
This report which has sent shockwaves in the real estate and financial circles, begins at the outset thus –
“The Congressional Oversight Panel is deeply concerned that commercial loan losses could jeopardize the stability of many banks, particularly the nation‘s mid-size and smaller banks, and that as the damage spreads beyond individual banks that it will contribute to prolonged weakness throughout the economy.”
The above report elaborates into pages, in typical elusive explanations, the ineffectiveness of the The Home Affordable Mortgage Program (HAMP), announced just over a year ago. The report makes extensive analysis on the problems faced by troubled property owners in the country, but miserably fails to offer any solutions.
Of course, they may say that it is the government to act upon it, as it is a mere overseeing agency to find fault with the program. But it is a vital point to note that the agency is much worried over the execution of the program – as can be seen from the very first paragraph of their report – to ultimately fulfill the objectives.
There is no denying that for the last 3 years market watchers and analysts of US real estate are sadly watching the deterioration of the system; lack of response in buying and selling of both residential and commercial properties; nose-diving of property values; sluggishness in selling markets; huge inventories of unsold properties piling up month after month; banks and lenders scratching their heads, holding hundreds of thousands of “dead weight” properties in their books, eating up their principal along with interest; and capping them all millions of proud American home owners driven away from their properties by the foreclosure fiasco.
At the time HAMP was announced, the government stated as its goal to achieve through this program, to create 3 to 4 million loan modifications – note “permanent loan modifications”- within a specified time of one to two years at the most. Against this, during the last one year period, HAMP has created all in all 66,465 permanent loan modifications only.
The main objective of HAMP is to save people from foreclosure devastation or at least check the flooding of foreclosure activity in the market. Has it achieved this objective? See for yourself – according to authentic foreclosure reports, the total number of foreclosure filings – in all stages of pre-foreclosure; scheduled foreclosure auction and repossession – in 2009 was 3,957,643 and the total number of US properties affected was 2,824,674. The increase in total properties affected, as against that of 2008, when HAMP was not there, is 21 percent and a staggering 120 percent increase from 2007.
Worse still – nearly 25% of US home owners are living in homes, whose property value is less than their mortgage loan outstanding, meaning they are not only “under water” but are also sinking. It is only a question of time these troubled home owners walk away from the property – a liability on which they are paying mortgages indefinitely, without any hope of the market value increasing in the near future.
On commercial properties COP has suggested further loan modifications, without taking into account the reality. Banks are elusive to take up loan modifications and have reported to COP that they are unable to do so, blaming the borrowers for non-submission of proper documents. Also Banks are under-staffed to cater to the influx of loan modification applications, as is the real-time experience of many commercial property owners under foreclosure process.
Considering all these, it is anybody’s guess whether HAMP is achieving its objective or not.

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