HAMP suffers stiff resistance from US Banks
When the Home Affordable Mortgage Program was announced last year and after studying the features of the foreclosure mitigation plans of the Obama administration, experts voiced their concern that the program would at best slow down the foreclosure activity and would not bring forth avoidance of severe economic strain to the US economy. After a year’s experience, the concern seems to be coming true.
Foreclosure activity reports and data from authentic real estate sites reveal that during the first quarter of 2010, there were 930,000 foreclosure listings all over the country. This is up by 7% from the quarter ended December 2009 and significantly up by 16%, compared to the average foreclosure activity figure in the first three quarters of 2009.
The US Treasury Department also confirmed this. The total delinquent households were over 6 million and with the help of HAMP just 228,000 distressed home owners were benefited and another 108,000 applicants were waiting.
Representing US lending banks, Wells Fargo and JP Morgan Chase have already expressed their inability to play along with HAMP. They have told in plain words to the Congressional Panel – a watchdog committee of the implementation and progress of HAMP- that they were “not inclined” to “fully embrace” the proposals contained for banks in HAMP, including banks coming forward to voluntarily lowering the balance outstanding on mortgage loan, in respect of borrowers suffering from unemployment and to work out more affordable levels of repayment.
They pointed out that the plan is short-sighted in that it applies to only a portion of the total borrowers, deeply in trouble and those who meet certain specific criteria. The Congressional Panel during its hearings brought out another obstacle faced by applicants aspiring for loan modifications.
While lending banks are inclined to concentrate on home-equity loans and second liens as well, Pension Funds and Mutual Funds often times hold only first mortgages. This leads to a glaring difference between the two lenders categories. Investors want the second level debt should be reduced first whereas banks want original mortgages to be tackled up front, as this is where they can save their money.
The tussle still continues and the ultimate sufferers are the millions of troubled US home owners.