The Home Affordable Modification Program (HAMP) could be reaching its final days, at least according to a bill passed by the House of Representatives on Tuesday night to shut it down. The program, started to help homeowners with underwater mortgages modify their loans, has faced criticism for months that it is all but effective.
HAMP Not Offering Enough Help
The House voted 252 to 170 to stop any new funding for HAMP. Eleven Democrats were included in the majority Republican vote to de-fund the program, which has been tapping the federal bailout fund for big banks.
The HAMP program has been among the most well-known modification programs presented by the government and was one of the latest to provide incentives to mortgage servicers so that they would modify mortgage loans for borrowers who were behind on payments.
Rep. Darrell Issa (R-CA), who chairs the House Oversight Committee, stated HAMP offered false hope to struggling Americans seeking permanent mortgage relief. “More homeowners have been kicked out of the program than have received permanent relief,” he said.
Other Modification Options Being Proposed
While many House members are looking to place HAMP on the chopping block, some want keep it around, noting ending the program would leave too many homeowners without options.
However, there are other modification ideas currently being tossed around by the government. In response to the mortgage loan scandal last year that resulted in a foreclosure freeze and the need for servicers involved in the scandal to pay fines, the government has proposed that servicers pay fines in the form of modifications.
A couple of options that have surfaced include:
- Obama’s principle reduction proposal: Obama proposed that servicers pay the $20 billion owed in civil settlement fines by reducing the principal amounts owed by their troubled borrowers. This would help homeowners reverse their underwater mortgages and get back on track for repayment.
- Cash for Keys program: Another option that was recently proposed came from the FDIC. Proposing the Cash for Keys program, mortgage servicers would give homeowners $21,000 in cash ($1,000 for financial advice and $20,000 for a new home down payment) in exchange for the keys to their homes.
As for how the HAMP shut down bill will fare in Congress, there is no word yet from the Senate as to whether they are likely to pass it or create their own version. However, President Barack Obama has stated he vows to veto it if passed in Congress.