Few enter HAMP

A record low number of homeowners in Colorado entered the final stage of the Obama Administration’s flagship program for keeping people out of foreclosure, just as new programs to help distressed homeowners are starting to surface.

Only 169 homeowners in Colorado moved into the permanent modification portion of the Home Affordable Modification Program, according to a report released today by the government. Last year, an average of 242 homeowners entered the program each month in Colorado. December was the first time fewer than 200 people had entered the permanent modification program.

On the other hand, the number of people entering the program rose by 10 to 1,005 from 995 in November. While a small number, typically the number of people entering the program drops each month. The Treasury Department has instructed loan servicers to pre-quality people, as initially a large number of distressed homeowners were accepted into HAMP, but were not accepted into the permanent modification portion of the program. Now, the vast majority of the people who begin the program remain in it.

Shannon Peer, housing counselor manager at the non-profit Brothers Redevelopment, wasn’t overly concerned about the drop in the permanent modification. First, it since it is only one month it could be an anomaly, he noted. In addition, he pointed out that sometimes the Treasury Department later revises the numbers, so it is possible that December numbers will end up being more in line with the average.

“Certainly, this will be a number we will keep our eye on,” Peer said. And while the number of people entering the program rose slightly, it is moving in the right direction.

“This is the first time in many months that we have seen any upward movement,” Peer said. “And at some point in Colorado, as people are getting back on their feet financially, we might start seeing more people qualify for the program.”

Initially, the Obama Administration hoped to help three million to four million people with HAMP. So far, about 930,000 people across the country are in the permanent modification plan, far short of the original projections. Just days ago, President Obama said that he would be the “first to admit” the previous programs by his administration “didn’t help as many folks as we’d hoped.”

Still, HAMP has saved people in the permanent modification part of the program about $10.5 billion in reduced mortgage payments. “A lot of people say it cost too much money, and it has been a boondoggle, but they only spent a fraction that was allocated to it,” Peer said. “I think that all of these programs chip away at the problem in different ways. It is good to have a suite of choices to address the problem.”

A few days ago, Obama urged the public to pressure Congress to adopt legislation that would make it easier for borrowers to refinance into historically low mortgage rates. That legislation is anticipated to cost $5 billion to $10 billion in new fees on banks, would help an estimated 3.5 million people. It would require the Federal Housing Administration assume the risk on the loan.

Meanwhile, banks are reportedly close to reaching a settlement with the government for improper loan servicing, which could result in principal reductions for some borrowers. Another program, called the Home Affordable Refinance Mortgage, or HARP, makes it easier to refinance a loan that already is guaranteed by Fannie Mae or Freddie Mac.

Details crucial

Details of what has been dubbed HARP 2.0 are expected to be released shortly.

Peter Lansing, president of Universal Lending, said the devil is in the details. Universal Lending is a sponsor of InsideRealEstateNews.

“Mortgage lenders and real estate agents want to get down to what that means to us and our customers right now,” Lansing said. “We need to know what this will mean for specific borrowers and homeowners. We need to know the nitty-gritty of it. We listened to what the President said in his State of the Union address and were very attentive, but now we need to know how it is going to work.”

He also said that every program, even if the intentions are good, can have unintended consequences.

“It’s like you have a big fire and you throw a bunch of water on it. Sometimes you will put out the fire and be left with a lot of water damage.”

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