The Home Affordable Modification Program (HAMP), also known as the foreclosure bailout program, was created in 2009. Its purpose was to allow people who were in danger of losing their home through foreclosure to keep their home by going through a loan modification program.
In summary, the foreclosure bailout program would encourage lenders to reduce your monthly mortgage payment, extend the length of your mortgage, put a halt to the foreclosure proceeding, stop charging late fees, and adjust your interest rate. In theory, the program would be a win-win - helping both the bank and the homeowner.
The scope of the program was predicted to assist anywhere from 3 to 4 million homeowners in modifying the mortgage. This would allow them to stay in their home by making lower monthly payments than their original loan agreement called for.
How Successful Was The Foreclosure Bailout Program?
Thus far the success of the foreclosure bailout program is mixed. Approximately, less than 15,000 homeowners have received permanent mortgage modifications. In other words, less than 5% of the people who enrolled in the program, have been affected by it. In addition, the number of foreclosures occurring are massively exceeding the number of people being helped by the program. Thousands of people are losing their homes each month.
One problem that the the foreclosure bailout program fails to address is the sheer number of people who have lost their jobs in this economy. Many of these people, even if accepted into the HAMP program, could not afford to make even the adjusted payments - because they have no income coming in. In fact, those without a job typically can't even qualify for the program.
The program is also complicated to the point where many homeowners would literally need the services of a lawyer to help them with the required forms needed by the banks in order to get their loans modified.
The Really Big Problem With The Foreclosure Bailout Program
The underlying and seldom discussed bigger problem, however, is that many of these homeowner still owe more on the mortgage than the actual property is worth. This means that many of these homeowners are essentially paying money on a home that will never have enough equity for them to recover.
The realization of this fact is causing some homeowners to simply leave their homes and let the bank foreclose. They see this as a better alternative than continuing to pay into a home that is only building up negative equity.
Experts have projected the number of foreclosures over the next five years or so to reach over 10 million - far too many for the foreclosure bailout program, as presently constructed, to handle.
Many people believe that, to be successful, the program would have to be greatly increased. Many also believe that one thing sorely missing from the program is an apparatus to reduce the principal. This solution would take into account the depression of the real estate market as a whole. Sadly, for millions of homeowners across the nation, there seems to be little chance of either of these things happening.
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