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Digital News Report – Republicans in the House of Representatives voted to eliminate the Home Affordable Modification Program (HAMP). The House Financial Services Committee voted 32-23 to stop a program that has caused problems for some while saving others from foreclosure.
HAMP is one aspect of the Making Home Affordable program the Obama Administration enacted in 2009. MHA includes a program to help homeowners refinance their home taking advantage of the current low interest rates. Another aspect helped homeowners who became unemployed. Finally if there is no way out, there is a program to help homeowners exit “gracefully” through a short-sale or deed-in-lieu of foreclosure.
Even if the House of Reprehensive is successful in cutting the program, it is unlikely to pass the Senate. Most insiders say the whole House will vote to kill the program next week.
So far, only 600,000 homeowners have received permanent modifications. The Obama Administration had hoped to help millions.
So what is the problem?
The banks may have created the loans, but in most cases they bundled and sold them to investors. The bank then enters into an agreement to service the loan. They collect the payments and turn the money over to the investor – minus a service fee.
In many cases, it is more profitable for the servicer to foreclose on the loan. They get paid a flat fee for filing the foreclosure, even if it isn’t in the best interest of the investor or homeowner.
Some in Congress are pushing to change that. Although there are already incentives to banks to modify the loan, the plan is to pay the banks enough to compensate for the foreclosure fees. But that bill will need to make it through the Republican House, which is very unlikely.
By Tina Brown