Obama's Home Affordable Modification Program was supposed to make things better for financially-strapped homeowners. The idea was to modify the terms of their original mortgages so that they could keep their homes. They could look forward to more favorable arrangements such as lower monthly payments – maybe even more than 50% of the original amount.
Yet it seems that the Home Affordable Modification Program (HAMP) needed its own modification. Current lawsuits against the Bank of America, JPMorgan Chase, and Wells Fargo suggest that everything did not work out as hoped for some home owners. One couple claims that they kept up their end of the bargain and made regular payments according to the revised plan. Yet they still ended up thousands of dollars behind in payments and facing the threat of foreclosure.
Apparently, numerous home owners have made similar complaints about HAMP. The lawsuits focus on dissatisfaction with the treatment of home owners under HAMP and the overall performance of the program. Many home owners point to less-than-outstanding results from the Obama initiative.
The main point of contention is that permanent modifications were given to only about one third of the borrowers in trial plans. Obviously, home owners in distress prefer 'permanent' changes. They lower mortgage payments to 31% of a borrower's pretax monthly income for a five-year period.
The lawsuits allege that the lenders should have given permanent modifications to home owners on a three or four-month trial payment plan. Yet the servicers claim that the trial plans did not constitute contracts and lenders can grant permanent modifications at their discretion. The lawsuit suggests that borrowers would have been better served to find options other than HAMP to save their homes.
Actually, it isn't just home owners who are railing against HAMP.
The Congressional Oversight Panel says, "We are deeply concerned about the unacceptable quality of the denial and cancellation reasons and strongly urge Treasury to take swift action."
Why were so many home owners denied permanent modifications?
A Government Accountability Office report discovered that servicers were applying a formula inaccurately to determine if the value of modification was greater than the proceeds from foreclosure. The use of this formula would disqualify many home owners who needed assistance. Treasury claims that it has required servicers to go back and fix any errors.
Yet Treasury officials say that HAMP home owners are not promised permanent modifications. It appears that there was confusion about HAMP from the beginning. The program was brought out in haste and the guidelines changed during the life of the initiative.
Originally, servicers enrolled borrowers in trial modifications without verifying income or financial hardship. It was not until much later in the program that officials asked for verification. This lack of foresight caused some of the problems that cropped up later down the line. Now the lawyers and officials will argue about the details of the program. Meanwhile, some homeowners are now without a home.
Did The Home Affordable Modification Program (HAMP) Work For You?