How HAMP Hurt Homeowners

At FireDogLake, David Dayen has done great work to show how the Home Affordable Modification Program — the Obama’s signature effort to keep financially distressed homeowners in their homes — has not just failed, but has actually hurt the people it is meant to help.

HAMP encourages homeowners to work with their banks to modify their mortgages, reducing their monthly payments if increasing their principal slightly. The problems with the program are many. HAMP does nothing to reduce the size of the mortgage in accordance with falling home prices. The process often takes months and months, and requires extraordinary amounts of tedious paperwork. It kicks out too many trial participants. And worst, perhaps, too often, HAMP does not significantly reduce monthly payments — meaning that a homeowner going through the HAMP process keeps paying a mortgage they can’t afford for a few months before defaulting anyway.

Dayen and Atrios, as well as ProPublica, the Huffington Post and a few other news organizations, have done an excellent job of describing the program for the catastrophe it is — particularly given that continued falling home prices and the long foreclosure crisis threaten pitching the economy into a double-dip. But there remains a lack of scrutiny about the program and the administration seems content to stay the course, slowing the crisis without solving it.