The Home Affordable Modification Program (HAMP) has failed. Designed to encourage banks to modify the terms of loans made to people who can no longer afford to service the debt, HAMP has generated little interest among the lenders who took the most money from the government bailout of the banking industry. Publishing the names of the biggest offenders had little impact last August, but the government is making another run at the shame game in hopes of encouraging lenders' participation.

On February 18, President Obama announced a series of initiatives designed to help homeowners remain in their homes. The idea behind the effort was for banks to voluntarily modify loan terms to enable borrowers to either refinance or qualify for a lower monthly payment to avoid foreclosure. According to the government, "Approximately 85% of mortgages are covered by HAMP participating services," so a significant number of homeowners should have been able to obtain relief through HAMP. (For related reading, see our article Saving Your Home From Foreclosure.)
The reality turned out to be something far short of expectations. While 650,000 mortgage holders received temporary loan modifications under the HAMP program, the U.S. Treasury reports that only 1,711 have received permanent relief. Meanwhile, the third quarter of 2009 saw foreclosure letters sent to more than 900,000 homeowners.

Shame On You
To encourage the banks to step up to the plate and help struggling borrowers, the government published a list offending banks in August 2009. Bank of America and Wells Fargo were among the bigger lenders topping the list.

A few months later, after earning millions if not billions in profits from borrowers through interest payments and penalties, the biggest banks have still taken little action to help borrowers. In fact, some borrowers have found their appeals rejected. Rejection means they are removed from the temporary reprieve program and now owe back payments for the amount that would have been due under their regular mortgage payments.

The government's response is another dose of shame, which includes twice-daily calls to the offending banks. Sadly, naming the shameless didn't work the first time and is unlikely to work the second time. In fact, many of the big banks are paying back the money they borrowed from the government just in time to free themselves from federal oversight and pay massive bonuses to the greedy executives who orchestrated the crisis in the first place. (To dig deeper into this topic, be sure to read An In-Depth Look At The Credit Crisis.)

The President's Intentions Were Good, But...
Sorry, Mr. President. Your intentions were good, but the people you hoped would carry them out are not. On the bright side, a recent survey about luxury spending released by Unity Marketing suggests that the affluent are feeling better and increasing their consumption. Once those bankers get their bonus payments, that trend - like the prospects for additional mortgage foreclosures - should continue.

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