Has HAMP Struck Out Looking?

Perhaps it was eager anticipation of the World Series kickoff, but Sen. Ted Kaufman's baseball analogy at a Capitol Hill hearing Wednesday clearly put into perspective a key defect of the Home Affordable[IMAGE]

Modification Program (HAMP) â€" a defect that watchdog groups and market observers have been lamenting for months now. And that is, Treasury's back-peddling of how many homeowners the program will actually help.

""What matters is not how often you swing the bat, but how often you reach the bases,"" said Kaufman (D-Delaware), who now chairs the ""Congressional Oversight Panel"":http://cop.senate.gov (COP), which is charged with policing initiatives that fall under the Troubled Asset Relief Program (TARP), including the Treasury's foreclosure-prevention efforts.

""According to Kaufman"":http://cop.senate.gov/documents/statement-102710-kaufman.pdf, sound oversight must start with an understanding of a program's goals. HAMP's goals, though, have become an elusive pop-up as the program's progress has come in increasingly sub-par with each report from the Treasury.

In February 2009, President Obama announced an aim to help ""as many as three to four million homeowners to modify the terms of their mortgages and avoid foreclosure.""

As that goal has appeared farther and farther out of reach, Treasury has redefined its aim, Kaufman said, and now says the purpose is to _offer_ a _temporary mortgage modification_ to three to four million homeowners.

""The distinction may sound subtle, but the difference is vast,"" Kaufman said.

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Borrowers who are offered temporary modifications may not accept. Those who accept may not complete the steps required to receive a permanent modification. Those who receive a permanent modification may redefault and lose their homes.

Kaufman noted that to date fewer than half a million homeowners have received permanent mortgage modifications through Treasury's program and, he said, ""as many as half of these borrowers will ultimately redefault and lose their homes.""

""At the rate that homeowners are falling through these cracks today, three million modification offers may translate into only a few hundred thousand foreclosures prevented,"" Kaufman said.

Phyllis Caldwell, chief of the Treasury's Homeownership Preservation Office, took part in the COP hearing Wednesday and ""responded to Kaufman's"":http://cop.senate.gov/documents/testimony-102710-caldwell.pdf disappointment in the program's lack of a meaningful target objective.

Caldwell said, ""The impact of [HAMP] should not be measured solely by the number of borrowers who have received modifications, but also by how the program has helped reduce the number of foreclosures and helped transform the way the mortgage industry views the modification of mortgage loans.""

Even though only a little more than a third of homeowners who've been offered a trial plan have been granted a permanent modification, Caldwell says the three-month trial period ""afforded [them] much needed breathing room.""

Caldwell also noted that the make-up of the housing crisis has morphed since the program was first put into place. What started out as a subprime market collapse has become a nationwide downturn driven by the recession and high unemployment. Caldwell stressed that the Treasury has made adjustments to its housing programs to account for these changes and is working to reach more troubled borrowers.

Treasury's ""latest HAMP report card"":http://dsnews.comarticles/new-hamp-mods-decline-by-16-in-september-report-2010-10-25 shows that only 467,000 distressed homeowners have received a permanent loan restructuring since the program began over 18 months ago. Over half of the 1.36 million trial plans started have been canceled, and 11 percent of those who've received a permanent modification have re-defaulted on the new loan after nine months.