If you follow the struggles of the government's "HAMP" foreclosure prevention effort, then you might think modifying mortgages is a lost cause. Last month, five times as many homeowners dropped out of HAMP than obtained permanent modifications. Its numbers of new trials and permanent modifications both declined in May. But there might be a reason why it's doing so badly: more attractive private servicer modification programs are crowding out the need for government assistance.
The House Committee for Oversight and Government Reform held another hearing on HAMP on Thursday. Representatives from five major mortgage servicers testified. In one part of the hearing, Rep. Jim Jordan (R-OH) asked what portion of their total mortgage modifications were permanent HAMP modifications (see bottom of post for video clip). The results weren't pretty:
As you can see, the vast majority of the time borrowers are choosing private modification programs over HAMP. Jordan followed up, asking whether there were many borrowers who qualified for HAMP but would not their program. All panelists said that this was a rare situation. In fact, some indicated that they often successfully modify mortgages for borrowers who didn't even qualify for HAMP. Here are a few choice responses.