HAMP Had Good Intentions But Was Doomed to Disappoint

“We only have three months left with hundreds of thousands of families facing foreclosure, is it time to rethink whether or not a mortgage foreclosure prevention program that is based on a group of servicers whom you describe as having done a ‘terrible job’ is a program that perhaps should be redesigned?”

These comments were shared by Congressional Oversight Panel Chairman Elizabeth Warren on Tuesday. They were directed at Treasury Secretary Timothy Geithner.

I hope this statement related to the poor performance of the government’s loan modification program did not shock anyone. We’ve known from the beginning that it had as much chance of success as the Pittsburgh Pirates have in winning the National League pennant race.

Don’t get me wrong the effort put forth to help homeowners stay in their homes is a noble initiative. However, the reality of its success depended on the largest mortgage servicers having the capability to pull it off.

Mortgage modifications were an enigma to these service providers. They did not have the experience, technical capabilities and in spite of their efforts have more internal bureaucracy than the federal government. Add to that the size of the problem, I am talking millions of defaulted loans, and the probability of success dwindles rapidly.

All the government successfully accomplished was the delay of the inevitable. These delays will ultimately hurt the housing market by building an unrealistic stockpile of foreclosed properties that will affect housing prices.

If you take into consideration the high level of frustration and disappointment the homeowners faced in dealing with these mortgage servicers you end up with nothing more than an expensive exercise in futility.

As long as the government sticks to its policy of engaging theory instead of implementing practical solutions we can expect more of the same.

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