By Shira Poliak - 07/21/10 09:57 PM EDT
The $700 billion TARP program included $50 billion dollars for the Home Affordable Modification Program (HAMP), which is aimed at helping struggling home-owners modify their mortgages.
But after 15 months of the program, the number of failed mortgage modifications through the program outnumbers the successful ones.
Elizabeth Warren, chair of the Congressional Oversight Panel on TARP, testified at a Senate Finance Committee hearing Wednesday that for every family that appears to have made it to a permanent modification solution, enabling them to stay in their home, 10 more have lost their home to foreclosure.
There were 340,000 successful permanent mortgage modifications through the program, though over 430,000 people who have gone through the program have since lost their homes to foreclosures, Grassley said.
Assistant Secretary of the Treasury for Financial Security Herb Allison defended HAMP in a conference call following the hearing. He said that the dynamic nature of the mortgage crisis and the lack of historical precedent for a wide-scale mortgage modification program like HAMP make it difficult to attribute specific target goals and benchmarks.
“For us to say we are going to have a finite number of people for these programs could constrain us from having the flexibility to deal with the dynamic problem,” he said. “By the nature of the crisis, we can’t control the outcomes.”
At the hearing, Neil Barofsky, special inspector general for TARP, reiterated his call for the Treasury department to provide more information on how many home-owners the Treasury expects HAMP to help.
“Treasury’s continued indications that this is a successful program without identifying these goals and benchmarks is simply not credible,” Barofsky said.
“The continued public suspicion that his program is an outright failure will continue unless and until Treasury ... comes clean with what its goals and expectations are,” he added.
Barofsky also said that he wants Treasury to make principal reduction mandatory, so that all struggling home-owners will go through mortgage mitigation. This, he said, will increase their leverage when negotiating with creditors.
Only $247.5 million of the $47.9 billion dollars committed to HAMP has been spent, according to Warren, which she said has contributed to the program’s lack of success.
“It’s too small and too slow,” Warren said. “We need a program with far more urgency and some real teeth in it.”