The Destroyers to the Rescue?

| Wed Aug. 26, 2009 2:36 PM EDT

On the back of today's Mother Jones investigation into the government's $75 billion, largely taxpayer-funded foreclosure relief program—a program shaping up to be a massive bust yet doling out millions and even billions to some questionable mortgage servicers—the Center for Public Integrity has released its own analysis of the program, the Home Affordable Modification Program. CPI found that of the top 25 HAMP servicers, at least 21 "were heavily involved in the subprime lending industry." Of the tens of billions allocated to HAMP, much "is going directly to the same financial institutions that helped create the subprime mortgage mess in the first place," says CIP executive director Bill Buzenberg. The fox, in other words, is guarding the heavily mortgaged hen house.

By all measurements, HAMP has been a bust. As I write in a story published today on MotherJones.com:

Industry experts are now questioning how many of the program’s estimated 235,000 modifications will actually benefit homeowners in the long term, and say that homeowners clamoring to participate in HAMP have created an industrywide logjam for mortgage servicers, resulting in substantial delays and backed-up customer service support. ...

The Treasury’s first servicer performance report (PDF), covering March to July 2009, found that servicers had offered modifications to just 15 percent of eligible delinquent homeowners, and initiated them for just 9 percent of that group...  Lawmakers in Washington, including Sen. Dick Durbin (D-Ill.) and Rep. Barney Frank (D-Mass.), chairman of the powerful House financial services committee, have begun to voice doubts over whether HAMP servicers are doing enough to help homeowners. Now Frank and Durbin are revisiting the idea of allowing bankruptcy court judges to modify mortgage terms, an option called “cramdown” that the Senate rejected earlier this year.

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I cite the questionable backgrounds of several HAMP mortgage servicers, some of whom are subjects of lawsuits for shoddy lending practices and have received failing grades from the Better Business Bureau. In today's story, I also question whether the program will ultimately help that many homeowners given the poor records of some of HAMP's servicers and the horror stories their customers tell in trying to deal with the servicers. But don't just take my word for it: You can read homeowners' own scathing testimonials about HAMP servicer Saxon Mortgage Services at SaxonWatch.com.

Like today's story, CPI's findings call into question whether HAMP will ever meet expectations. HAMP may be a good faith effort by the government, but as plenty of consumer advocates, attorneys, and lawmakers have said, if the administration wants to truly help homeowners, bringing back "cramdown"—when bankruptcy court judges modify the terms of mortgages to make them more affordable—is more necessary than ever before.