Latest changes could be Achilles Heel of HAMP- By: John Smith

Description : As American house prices continue to slide and a double-spike in foreclosures could be looming, there’s talk again that Obama’s well-meant HAMP may have to fall on its sword.

I chatted first with Stella Hopkins of the Charlotte Observer. The first alarming fact I learned was that, when the latest round of changes takes effect, unemployment benefits will not count when a lender looks to see whether a mortgage payment reduction could be feasible. That means, if you’re a distressed borrower on unemployment benefits you’re back to where you started.

Is that crazy or what? Did the Federal Government really intend to strengthen the arm of firms that benefit from foreclosures?

“This means that the loan modification tool, which is supposed to help unemployed people keep their homes, is fatally flawed,” concluded Stella wryly.

I paid a visit to the N.C. Justice Center next, where I met up with nonplussed Attorney Al Ripley. “I’m afraid the guidelines are impractical to the point of being ridiculous,” he agreed. “Whoever wrote them simply doesn’t understand the needs of unemployed home owners.”

Helping people out of work to keep their homes is the keystone of Obama’s $75 billion plan known as HAMP that’s intended to put a brake on foreclosures. It’s supposed to help up to 4 million Americans between now and 2012 – but, if this keystone fails, the whole building will collapse like so many distressed Americans’ dreams.

Thus far a mere 170,000 home owners have received long-term relief in the form of modified mortgages – does this mean that the plan is flawed, or are the lenders not trying hard enough? While it’s true that HAMP does provide short term relief to underwater borrowers on unemployment benefits for at last three months, the six month cap on that is cruel, given the state of the unemployment market.

The uncaring twist in the tale is that, although home owners may apply for permanent relief later, if they’re still relying on unemployment benefits, then that income can’t count when their ability to pay anything is played off against their prospects of permanently downsized mortgage payments.

Top N.C. Mortgage Regulator and leading light in national anti-foreclosure efforts Mark Pearce summed things up for me. “Any program that provides even temporary air space is good,” he commented. “What we need now is follow-through for those folks that remain unemployed for a longer time.”

“Think of it as band-aid,” N.C. Housing Finance Agency’s Foreclosure Prevention Team Leader Rich Lee added. “Although HAMP as it stands will not help a significant number of people permanently, at least we’ve bought some time.”

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