Has Obama's Mortgage Relief Plan Helped?

With the shape that that housing market is in, stories abound of people who are trying to make their mortgage payments on a home that is nowhere near what it was worth when the homeowner purchased it. One such story is that of Brenda Reed, a 64-year-old homeowner who operates a bed and breakfast out of her house. She owes about $500,000 more on her home that the actual market value and she is in danger of losing that as well as her business as a result.

But her story is not unique. There are hundreds of thousands of other homeowners in the country who are in a similar position. And the Home Affordable Modification Program (HAMP) which was designed and created by the Obama administration has not helped these people much. HAMP was designed as a way to encourage the banks and lenders of home loans to renegotiate the terms for homeowners who have fallen behind on their payments and become a risk for foreclosure. This would allow these homeowners to stay in their homes with modified payment arrangements rather than pushing them out onto the street. Unfortunately, the program has heightened the hopes of thousands of homeowners only to have them lose their home anyways while lenders and banks dragged their feet to renegotiate the deals.

In Reed’s case, her mortgage lender gave her a three-month trial period. During these three months, she was allowed to pay a lower mortgage payment while her lender decided if they should give her a permanent lower payment. Before long, however, she was “bumped” from the program and told she did not qualify for the help that HAMP offered. There are hundreds of thousands of other homeowners who have been led to believe they could receive mortgage help through HAMP only to find out that they did not qualify as well.

According to some analysts in the industry, the Treasury Department has changed the goals of the program and it has now become more or less a way for the banks to postpone the problems of delinquent mortgages. According to one General Accountability Office report, one of the main reasons for the frustrations and problems with HAMP is that the Treasury Department does not publicly announce any goals or performance information. As a result, it almost seems like the program has, at best, done very little to help the mortgage problem and, at worst, has made the problem worse.

It may be awhile before we see the long term effects of HAMP and other government programs designed to help troubled homeowners. But the way it looks right now, these programs are not the cure-all for the mortgage industry.