May 27, 2024

Economix: Foreclosure Prevention: The Treasury’s View

An article today, and a follow-up blog post here on Economix, looked at a Treasury effort at the heart of the administration’s foreclosure-prevention effort, the Home Affordable Modification Program. The program is widely considered to have fallen short of expectations, and the Republican-led House voted Tuesday evening to eliminate it. The Treasury makes the case that any judgment of the program must take into account the circumstances in which it has operated. In response to the Times article, Timothy Massad, the acting assistant secretary for financial stability, laid out the Treasury’s view:

Any assessment of the success of the Administration’s Home Affordable Modification Program (HAMP) must account for the climate in which the program was launched, the unprecedented nature of the program itself, the authority we have in administering it and the targeted universe of homeowners we set out to help. Today’s New York Times piece, “Foreclosure Aid Fell Short, and Is Fading Away,” is unfortunate in its failure to address many of these realities.

Before HAMP was launched in the Spring of 2009, little had been done by the government or private sector to address the historic housing crisis or to provide relief to the significant backlog of homeowners at risk of foreclosure. The Administration built from scratch a program to address the tremendous need while appropriately balancing the interests of taxpayers. Mortgage modifications had never been done on such a scale; servicers did not have the people, the procedures or the systems to deal with the crisis; and the housing market was constantly changing.

Under the law, Treasury had the legal authority to implement a voluntary foreclosure prevention program. We are not able to regulate the mortgage servicers and we cannot issue fines. But at a time when the industry still has a long way to go in meeting customers’ basic needs, we have used disclosure around servicer compliance to keep the pressure on and help ensure that homeowners are better served by mortgage companies. And we have used the important standards that HAMP has put in place to push the industry to modify 2 million additional mortgages outside of the program. Because of the standards HAMP has created, American families have many more options to avoid foreclosure and relief is becoming more sustainable for struggling homeowners.

Without question, we have not helped as many people under HAMP as we originally estimated. Much of that is due to prudent eligibility criteria under a program designed to protect limited taxpayer resources. As a result, we’ve also spent far less on HAMP than we originally estimated.

Even so, under HAMP, more than 600,000 families across the country have received permanent mortgage modifications to date, resulting in real payment relief. And each month, an additional 25,000-30,000 homeowners receive HAMP modifications. For many of these families, a reduced monthly payment is the difference between keeping their home and foreclosure.

The housing crisis took years to create, and there is no easy or quick way to repair the deep damage that it caused. We believe that HAMP continues to provide critical assistance for homeowners and is an important part of the continued recovery of the housing market. We will continue to work to strengthen program implementation while providing additional relief for communities hit hard by foreclosure.

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