President Obama’s State of the Union speech gave little mention to the housing crisis, as the housing market shows signs of improvement and his HAMP (Home Affordable Modification Program) program begins to wane in popularity. But, did HAMP already serve its purpose? The HAMP guidelines and structure have served as the basis for the creation of broader reaching lender proprietary loan modification programs which are the dominant solution for troubled mortgages today. In the beginning of the mortgage crisis, lenders and servicers were scrambling for solutions, until HAMP provided them with a structure for reformulating home loans which would make them affordable again. From this offering, loan modifications have now evolved into the most effective solutions in the marketplace today.
Recent reports by the Hope Now Alliance show that the number of HAMP loan modifications has declined sharply, as lender “in-house” or proprietary programs has become the dominant solution for troubled mortgages. However, critics are quick to point out that these proprietary programs are simply offshoots of the HAMP program with less stringent qualification criteria. In other words, HAMP provided the framework for these other programs which have adapted to meet the needs of more homeowners who would not qualify for assistance under the HAMP guidelines.
Obama did mention that the housing market is crucial to a healthy economy, and pointed to some meaningful figures that the housing market continues to improve. However, he never mentioned his HAMP program, which was designed to stop foreclosures and keep Americans in their homes. Conversely, he did mention cutting some red tape from the HARP (Home Affordable Refinance Program) program in order to allow homeowners that have remained current on their mortgage payments to refinance their mortgages and take advantage of today’s historically low interest rates.
Somewhat controversially, he referred to those Americans who have remained current on their mortgages (a requirement for the HARP program) as “responsible Americans”. There should be no doubt that many American have taken advantage of the mortgage crisis by strategically defaulting on their homes or simply refusing to make their mortgage payments until their lender would offer them a modification. At the extreme end of the spectrum, some homeowners are simply “squatting” in their properties with no intention of resolving their mortgages and taking advantage of living in a home without making any payments until their lender can foreclose on the property. This segment of the population has taken advantage of, and exacerbated the mortgage crisis.
However, this only covers the two extremes. Millions of Americans who never sought to take advantage of the mortgage crisis, but are instead the victims of a recession and troubled economy, are still facing troubled mortgages and foreclosures. These are “responsible” Americans as well, who have simply been unable to keep up with their payments due to a decrease in household income. For many in this category, the President’s speech left them feeling forgotten.
Regardless, those homeowners who fit this category should understand that they are the most likely candidates to receive a loan modification, as banks look favorably upon homeowners who have honestly struggled to keep up with their mortgage payments but have been unable to do so due to legitimate hardships.
On a brighter note, while Obama only grazed the housing issue, the main focus of his speech was the creation of jobs and an overall improvement of the American economy. It is safe to say that increasing household incomes would go a long way towards preventing more foreclosures and making homes affordable again.