Home Owners Defaulting on HAMP-modified Mortgages

Although it’s hard to pinpoint the reason why, in a report presented to Congress last month by TARP (the Troubled Asset Relief Program) we learned that many homeowners whose loans were modified under HAMP are defaulting on their modified mortgages.  Nearly half of the people that were approved for permanent modifications when HAMP first started, in the summer/fall of 2009, have defaulted.  Also, nearly 40% of the people whose loans were modified in the last quarter of 2009 have defaulted.  And averaging across the year, about a third of mortgages modified under HAMP in 2010 have now re-defaulted.

That is a whole lot of defaulting.  It’s not easy to get a mortgage modified, much less to have it modified under HAMP.   Generally homeowners are glad to receive the modification, so long as they believe they can make the payments.  Then why all of these defaults?

Unfortunately, there is no data available that pinpoints the cause of the defaults.  Why couldn’t the homeowners sustain the payments?  Why weren’t the modifications viable in the long run?

While there are over 860,000 homeowners out there who have received permanent HAMP modifications, there are over 312,000 that have defaulted on their HAMP-modified mortgages. 

What can HAMP do to stop this trend?  Without further data, it’s impossible to say.