It seems I am not the only one who does not consider the administration’s declaration for success of the HAMP program to be rather odd.
From The Wall Street Journal article, “An Odd Way to Measure the Success of Mortgage Mods”
Many of the people in trial mods will crash out of the program. Some are unable or unwilling to document their financial situations; others turn out not to qualify once banks take a closer look at their finances. Some fail to keep making the reduced payments. Wells Fargo & Co. said last week that, among the 108,000 borrowers who had completed three trial HAMP payments to Wells as of Feb. 28, only about half were expected to qualify for permanent mods.
Yet getting an offer of help doesn’t translate into home-saving success in a huge number of cases, though it does delay the foreclosure process considerably.
Even for those who do get “permanent” mods, many eventually will default because they are still drowning in debt. HAMP is designed to shrink payments for the mortgage, property taxes, insurance and homeowners association or condominium fees to 31% of pretax income. But many of the eligible households have huge wads of credit card and other debts. Even after loan modifications, the median ratio of monthly debt payments to pretax income is 60%, the Treasury says.
Despite the huge expectations the administration built up for HAMP, dealing with this situation was never going to be easy. Nearly eight million U.S. households, or 15% of those with mortgages, are behind on payments or in foreclosure in what has become by far the worst wave of defaults since the 1930s. Stand by for more rescue plans from Uncle Sam, and perhaps more inflated expectations.
Soylent Green Is People
March 16th, 2010
Remember that 59% Debt To Income ratios is the average of all mods. This means higher DTI mods exist. Calculated Risk (noted in an earlier post) took apart what this meant in real dollars. I wish (and asked but he didn’t have time to…) if CR would drive the numbers further into reality by taking his net, then subtract out Federal plus California State taxes. That number would then be pushed down by “the basics” – Electricity ($50), Gas ($20), Water ($20), and let’s say $100 per month in gasoline and $45 per month in telephone expenses. Heck, let’s even consider car insurance, assuming the homedebtors Corolla is paid off.
No cable TV. No Internet service. No Blockbuster rentals….Zip. After all of those hard wired expenses are pushed against a 59.8% debt to income ratio, there is only enough left over for a large Kool-Aid, plus Top Ramen + Cat food casserole three nights a week.
Although this is a snark post, I have the greatest of sympathies for the very, very few in HAMP with true “beyond their circumstance” issues but society, not Government, should lend a hand to those in dire straits. Have mods helps a few of the others in the program? Well, about 16% of everyone who applied has had a permanent mod. We’ll see where they go in about 6 months given the high post Mod failure rate (60% by last count) To be clear: This isn’t success. It’s Government sanctioned debt slavery. Let’s call it what it is, ramp up the REO process, and move past this charade known as HAMP.
My .02c
Soylent Green Is People.