Launched in 2009, HAMP initially sought to lower monthly mortgage payments to an affordable and sustainable level through a uniform loan modification process. HAMP funding was a part of the $29.9 billion authorized for the Making Home Affordable Program. Later in 2012, program options were expanded to focus on principal reduction modifications, expand relief for unemployed homeowners and ease other alternatives to foreclosures such as short sales.
To date, $12 billion has been obligated to pay incentives for HAMP homeowners already in the program. With the approaching expiration date, any unspent funds will ultimately be returned to Treasury’s general fund. Yet, many communities have yet to economically recovery.
For example, HAMP’s unemployment program offers a minimum of 12 months of temporary forbearance to allow these homeowners time to focus on securing new employment while still owning their homes. Depending upon homeowner circumstances, forbearance plans can be approved with some required payment or none at all. Thus far, more than 30,500 homeowners have accessed this program.
It is also relevant to note that African-American unemployment is higher than most. According to recent U.S. Bureau of Labor statistics, Black unemployment at 14 percent is double that for White Americans.
The nation’s metro areas with the largest HAMP participation rates are Los Angeles-Long Beach, New-York-New Jersey, Miami-Fort Lauderdale, Chicago-Northwest Indiana, and California’s Riverside-San Bernardino. California and Florida homeowners represented more than a third of all HAMP activity.
Additionally, the most recent HAMP program performance report shows that the program is working as it increasingly helps eligible borrowers by forgiving a portion of their mortgage debt. HAMP homeowners who received permanent mortgage modifications were granted a total of $9.2 billion in principal reductions. Additionally, 114,000 homeowners avoided foreclosures through short sales or deed-in-lieu.
Nationwide, the average non-HAMP mortgage modification reduced monthly payments by $389; while the average HAMP modification reduced the same monthly payments by $558. Similarly, non-HAMP servicers reduced interest rates in 73 percent of modifications made in the fourth quarter of 2012. Participating HAMP servicers reduced interest rates for 81 percent of borrows during this same period.
Of all HAMP trial modifications, 80 percent of the homeowners were at least 60 days delinquent at the trial start. The chief reason—for 68 percent of the troubled homeowners—was financial hardship because of reduced income or unemployment.
In 2012, CRL research found that among the 10.9 million homes that went into foreclosure between 2007 and 2011, more than half of the “spillover” cost to nearby homes have led to a $1 trillion loss in home equity for African-American and Latino families. High concentration of foreclosures in neighborhoods of color perpetuated disproportionate burdens in America’s continuing foreclosure crisis.
Coalition leaders agree: “Effective housing policies must recognize that neighborhoods with higher foreclosure rates and deeper foreclosure-related impacts will take more time to recover.”
(Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: charlene.crowell@ responsiblelending.org)