Tags: hamp | obama | Mortgage | helps | Lenders

Report: Mortgage Modification Program Helps Lenders More Than Borrowers

By    |   Tuesday, 07 Sep 2010 08:41 AM

The Obama administration’s mortgage modification program reportedly is helping home lenders more than struggling home buyers.

The problem with the Home Affordable Modification Program (HAMP) is that it just kicks the can down the road, critics say.

“HAMP stumbles along, more often simply prolonging the pain of foreclosure than providing a solution,” writes AOL Daily Finance columnist Mark Gimein.

“By keeping borrowers in limbo while letting lenders delay repossessing houses they can't sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess.”

Mortgage modification works fine for lenders, because they can simply wait for homeowners to wind their way toward foreclosure, while dealing with the onslaught of homes already repossessed, Gimein says.

As for homeowners who receive modification, “the typical modification recipient, despite an average $513 drop in monthly payments, has to devote 63.5 percent of his or her income to mortgage payments, other debt, and taxes,” he writes

“One independent estimate from Barclay's Bank is that 60 percent of homeowners granted loan modifications will eventually default again.”

Lenders are headed for trouble too, says star bank analyst Meredith Whitney. Banks aren’t prepared for a double-dip in housing, which “it looks like we are having,” she told Bloomberg.

Existing home sales plunged 27 percent in July from June to at least an 11-year low.

“They (banks) need higher capital,” Whitney said.

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The Obama administration s mortgage modification program reportedly is helping home lenders more than struggling home buyers. The problem with the Home Affordable Modification Program (HAMP) is that it just kicks the can down the road, critics say. HAMP stumbles along,...
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Tuesday, 07 Sep 2010 08:41 AM
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