The Home Affordable Modification Program, HAMP, has seen new trial modifications drop 90 percent since September, an indication that the beleaguered foreclosure rescue program is reaching the limits of its usefulness. Often criticized for not saving the promised millions from foreclosure, HAMP’s latest report indicates significant declines in the number of new homeowners accepted into the program and a dramatic increase in the number of trial modifications that have been rejected.

In reality, it’s always been impossible for the administration to keep 7 to 9 million families from losing their homes; and the emotions and finances of millions of homeowners should never have been used for political means. Far too many of the nation’s troubled mortgages do not qualify for modification, and many who are accepted are so deeply in debt that success is impossible, failings of which politicians and bureaucrats have been aware since HAMP was first announced.

Additionally, many of those accepted for loan modification will ultimately lose their home as its value is far below the amount owed. In a recent POST I described how many of those already accepted into the program will ultimately choose strategic default. With the average homeowner in modification owing 50 percent more than their home’s value, and aware that they are, in reality, only “renting,” large numbers will simply choose to walk away.

Since its inception, the weaknesses of HAMP have been apparent; and I’ve described some of them in past blog posts. However, the program’s shortcomings are not the point. By providing an element of hope, false hope, the government has made the situation worse for hundreds of thousands of homeowners who have used their remaining cash in trying to qualify for a program that would ultimately fail to “save” them. Instead of providing a vague promise, it would have been far better if those administering the program would have made it clear who qualified and who did not. Doing so would have helped struggling homeowners avoid a pointless and frustrating exercise that was doomed from the start.

An interesting analysis of the latest report is provided on CALCULATED RISK BLOG.

Click here for the FULL HAMP REPORT.

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