At a Crossroads: Lessons from the Home Affordable Modification Program (HAMP)

Abstract

The successes, failures, and missed opportunities of the Home Affordable Modification Program (HAMP) provide a roadmap for national loan modification standards. HAMP has reached more homeowners, and successfully modified more home loans, than any program in history. Nevertheless, HAMP has been justly criticized for its limited reach relative to the scale of the foreclosure crisis, its lack of transparency, and the failure to provide for effective enforcement. This article draws on the available quantitative data and on the experiences of attorneys and housing counselors around the country who have spent the last three years assisting homeowners struggling to access HAMP. Although HAMP never covered the entire mortgage marketplace, HAMP’s failure to reach its intended scale has one root cause: massive servicer noncompliance. National loan modification standards should incorporate the successes of HAMP, which provided for increased access to sustainable modifications for many homeowners. But national loan modification standards must not fall into the same trap that HAMP did. Without strong mandates and real consequences for noncompliance, servicers will continue to implement modifications haphazardly or not at all, leaving the economy in a tailspin. Drawing on the lessons of HAMP, this report identifies five core principles for effective national loan modification standards: efficiency, affordability, accessibility, accountability, and enforceability. These core principles for national loan modification standards will protect all market participants.