This morning, the Congressional Oversight Panel for the TARP bank bailout held a hearing on the government's foreclosure prevention effort. In particular, the Making Home Affordable Program (HAMP) was in the spotlight. Thus far, it has had lackluster results, to be kind. Yet one witness, Treasury's Chief of the Homeownership Preservation Office Phyllis Caldwell, revealed a very interesting kernel of information. She said that the expected cost of the program is $29 billion. That's far less than the $75 billion allocated. It also allows us to estimate how much a successful mortgage modification actually costs. So let's crunch some numbers!
Thus far, the Treasury has started 495,898 permanent mortgage modifications. Its success rate at converting trials to permanent modifications is so far around 41%. To be conservative, let's say that going forward it does a little better, and that 50% will be successful.
So to those permanent modifications, let's add 86,796, which accounts for half of the active trial modifications that are still in the HAMP pipeline. At this point, it looks like the programs new trial modification growth is steady at around 25,000 or less per month. Again, half of that means 12,500 more permanent modifications per month. Conservatively, let's imagine the program rolls on for two more years, providing another 300,000 permanent modifications. That gives us a grand total of 882,694.