HAMP to Implement Changes, Give Additional Relief to Home Owners

On Friday, the White House announced changes to its Home Affordable Modification Program (HAMP). Seeking to help troubled homeowners from foreclosure, the changes will assist additional people facing housing problems and give more relief to those already in the program.

HAMP had been created to help homeowners stay away from foreclosure by enabling them to decrease monthly loan payments and occasionally cut the amount owed on their loans. The program has lenders voluntarily lowering the interest rate while the government subsidizes them to do so.

According to the Treasury, as of Nov. 30, banks have decreased principal amounts owed by approximately 36,000 borrowers and 910,000 of them near foreclosure, have been able to get their mortgages permanently changed for lower payments thanks to the program.


The first change will include the tripling of incentive payments to investors for decreasing the amount owed by borrowers; this is also known as principal reduction.

In addition, the program will now include both tenant-occupied and vacant properties that the borrower plans to rent. The Treasury said this expansion will “provide critical relief to both homeowners that live in their homes and those who rent their homes, while further stabilizing communities from the blight of vacant and foreclosed properties.”

Additional changes include …

a one-year extension for the program until December 31, 2013 and for borrowers carrying a greater amount of secondary debt, they may now participate in HAMP.

Extending its Reach 

HAMP would like to expand its borrowers and been trying “to encourage” Fannie Mae (FNMA) and Freddie Mac to participate. To date, the two have not been in any government principal reduction programs, according to MarketWatch. Their regulator, the Federal Housing Finance Agency (FHFA), is not supportive of this and has said by by decreasing the principal on their mortgages, taxpayers would incur a $100 billion cost.

The two companies have received incentives by HAMP to cut the amounts owed by their borrowers of mortgages either owned or insured by them.

The FHFA reiterated the potential large costs to taxpayers and said they “recently released analysis concluding that principal forgiveness did not provide benefits that were greater than principal forbearance as a loss mitigation tool.” They added the “assessment of the investor incentives now being offered will follow its previous analysis, including consideration of the eligible universe, operational costs to implement such changes, and potential borrower incentive effects.”

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