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On Thursday, the Obama administration said that it was extending the life of the Home Affordable Modification Program, or HAMP by two years. The anti-foreclosure program was set to expire this year.
The program offers permanent mortgage modification and pays lenders and servicers from the Treasury Department’s financial bailout fund to rewrite the loan terms of borrowers struggling or failing to make their current mortgage payments.
Treasury Secretary Jack Lew said, “Extending the program for two years will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry.”
When the HAMP was first launched in 2009, the administration expected that 3 to 4 million distressed homeowners would benefit from the program. However, reports show that until now, only 1.1 million homeowners have been able to avail the benefits of the permanent mortgage modification offered by HAMP.
Even though the administration seems to have made strong efforts to extend the reach of the program and expand eligibility, while increasing the payments made to mortgage companies to lower monthly payments of borrowers – the program did not reach its intended targets.
Out of the $29.9 billion in bailout funds allocated for HAMP in 2009, only $5.2 billion has been spent for the benefit of distressed homeowners until March, 2013.
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The program has, however, come under heavy criticism from both Democrats and Republicans who cite high percentages of people who continue to default even after receiving government aid under the program.
Last year, the government tried to extend the reach of the program by offering incentives to Fannie Mae and Freddie Mac and urging them to use the principal-write down component in HAMP. But the companies’ regulator blocked the move holding that there was insufficient basis to prove that the potential benefits to homeowners clearly outweighed the potential costs to taxpayers.
Admitting that the situation was far from stable, Jack Lew said, “The housing market is gaining steam, but many homeowners are still struggling.”
The decision for extending HAMP was criticized by Republicans. Representative Jeb Hensarling, the Republican chairman of the House Financial Services Committee said, “HAMP is a costly and abject failure that takes money from hardworking taxpayers, bails out banks that made bad loans, and forces Americans who struggle to pay their own mortgages to also pay (that of) their neighbor’s.”
