HAMP FALLING SHORT OF HELPING TO SLOW FORECLOSURE CRISIS

The foreclosure-paperwork furor is deepening criticism of the U.S. government's high-profile mortgage-restructuring effort, which has fallen short of its goal of helping three million homeowners, the Wall Street Journal reported on Saturday. More than half of the 1.4 million borrowers approved for temporary modifications have fallen out of HAMP because they did not qualify. The program "has undoubtedly put people into foreclosure," says Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, which funds HAMP. "It's a parade of documentation horrors." In a report to Congress on Oct. 26, Barofsky concluded that some borrowers seeking loan modifications through HAMP might wind up "worse off than before they participated." Back payments, penalties and late fees triggered when homeowners are rejected for a permanent fix can push some borrowers over the edge, he said. As part of HAMP, mortgage servicers and investors get financial incentives to modify a borrower's loan payment to 31 percent of monthly gross income. Servicers typically hit that number by lowering interest rates or extending a loan's life. Borrowers must make at least three "trial payments" to be considered for a permanent fix. Borrowers who miss a payment or otherwise fail to win a permanent modification essentially are stuck with the original terms of their mortgage. The Treasury Department doesn't record how frequently errors occur with documentation on home loans submitted to more than 2,500 financial institutions and servicers empowered by the U.S. government to grant and reject HAMP requests. An outside review of borrowers denied permanent modifications disagreed with the servicer's decision in 4.8 percent of the loans during the fiscal quarter ended in August.

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