Housing Policy

Nearly One Quarter of Federal Foreclosure Prevention Participants Re-Defaulting on Mortgages

While President Obama is set to make a "major economic address" tomorrow, the consequences of his policies often speak for themselves.


above water
Reason 24/7

While President Obama is set to make a "major economic address" tomorrow, the consequences of his policies often speak for themselves.

From CNN Money:

Borrowers who received help through the government's main foreclosure prevention program are re-defaulting on their mortgages at alarming rates, a federal watchdog said in a report released Wednesday.

Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.

In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default. Those who have been in the program since 2009, are re-defaulting at a rate of 46%, the inspector general found.

Who'd have thunk it?

Follow these stories and more at Reason 24/7 and don't forget you can e-mail stories to us at 24_7@reason.com and tweet us at @reason247.

NEXT: Wall-to-Wall Royal Baby Coverage Didn't Do Much to Boost Cable News Ratings

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. alarming rates

    Alarming to who, exactly?

    1. “Alarming” is the new “unexpected”.

  2. Can someone please explain to me why renters haven’t overthrown the government yet? I mean I really don’t get it. And I’d bet they voted disproportionately in favor of pro-HAMP politicians, too.

    1. Renters tend to be younger, less responsible and much less likely to vote. Apathy, apathy, apathy.

      1. Hey! I take offense to that entirely accurate description of me!

        1. Hey! I take offense to the fact that you took offense to something I wrote!

    2. I think renters should be not allowed to vote.

      I also think borrowers and lenders should not be allowed to vote. I don’t think the practice should be illegal, I just think it perverts government. Imagine if instead of having to pass some stupid propaganda test or accidentally living long enough you actually had to prove some sort of economic skill to influence public policy.

  3. Hm. People who can’t afford a house can’t afford a house. Imagine that.

    1. You mean A=A? Heresy!

      1. We all know what the mathematical signs are for “equals”, “approximately equals”, “is defined as” and “is of the same order as”.

        But what is the mathematical sign for “should equal”? This sign would be particularly useful for our political class.

        1. A wingding of a middle finger?

          1. Or maybe just this guy: :p (We’ll call it the ‘derp’)

            A = A, but A :p B

            A equals A, but A derp B.

  4. If those people had been put on a government payroll, they would have been able to afford their house payments.


    1. Until their hours were cut to 29/week so the local government could avoid parts of PPACA.

  5. That’s because the evil bankers forced — forced! — the downtrodden working class to take out mortgages that they should have known that they couldn’t afford. I know because I heard it on NPR.

  6. This economy is so weird, what with all of the smoke, mirrors, and duct tape.

  7. “Surprisingly ineffective” program just needs a bigger budget.

    1. They have a bigger budget already! This program did not come anywhere near its enrollment goals. I don’t know what the politicians ask for when a program is already failing to spend all the money its got… Mandatory Volunteers?

  8. That’s because the evil bankers forced — forced! — the downtrodden working class to take out mortgages that they should have known that they couldn’t afford.

    Predatory Loans!

    1. Is this an improvement over when they were being evilly too restrictive, preventing people from getting homes just because of racism?

      1. Irresponsible people: Damned if they do and damned if they don’t (get a loan).

    2. While there were some shady practices in lending before the bubble burst, I’m firmly of the belief that the tremendous pressure on lenders not to build in risk-based pricing or other risk-limiting measures on high credit-risk borrowers contributed to the mess.

      There is no reason at all for the government to push home ownership or to meddle in borrowing. If lenders commit fraud, then that’s actionable. But borrowers have to be sensible, too, and litigating or regulating away their stupidity is more than a little pointless.

      It makes a whole lot more sense with mortgages (and student loans) to let the banks be restrictive on making loans to people unlikely to repay them. Either not making the loans at all or requiring higher interest rates, more security, etc.

  9. re-defaulting at a rate of 46%

    To a top man, that simply means 54% success!

  10. Anyone else catch Barney Frank on tv yesterday criticizing the Republicans for not reforming Fannie Mae before 2006 when they had the chance because they controlled Congress? He’s certainly half-true but I didn’t catch him implicating his own role in it. Nor did the “journalist” questioning him say, “Now just a minute, Mr. Frank.”

    1. NYT: New Agency Proposed to Oversee Freddie Mac and Fannie Mae

      Published: September 11, 2003

      The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

      Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

      Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

      These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

  11. The only way to teach dumb people not be be dumb is to let them experience the consequences of being dumb. It’s best if this happens when people are young, because they have fewer assets at risk and more time to recover.

    1. There’s no point in teaching people who don’t learn.

      1. Oh, I think they’ve been taught. They just didn’t learn what the politicians intended.

      2. The ones that never learn wind up in prisons or cemeteries.

        1. Or in positions of political power.

          1. Politicians have learned how to work the system for the inside.

            1. Yet they are insulated from the consequences of their decisions, so there’s no need to learn from them.

              1. The feedback loop is broken at election.

              2. The feedback loop is broken at election.

  12. In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default.

    This is tautologically true. Since there’s no way to “undefault” once you have defaulted, any group of debt instruments is going to see the percentage of defaults increase the further you get from initiation.

  13. I’m still waiting for someone to explain how it fits into the TEAM BLUE principles of “fairness” and “social justice” to use my tax dollars to bail out people who made bad financial decisions. I didn’t borrow to the max, I have always had enough equity so that my mortgage has never been underwater, I have never missed a payment on my loan (an American Hero always pays his debts).

    1. It’s not fair that only the financially responsible own homes. Everyone deserrrves a piece of the American Dream.

    2. If you never missed a payment on your loan, it just proves that you have Teh Privilege. Social justice means you should pay to help out people who don’t have your privilege!

  14. I refinanced my mortgage under HAMP last year. I could afford the old payments, but the new terms were going to save me a few hundred a month, and no way I was passing that up.

    I had tried in 2010 to refinance under HAMP, and I was rejected then. The Bank of America mortgage person I was talking to basically told me I should stop paying so I could get a better chance at a modification. Told him I wasn’t that stupid.

    1. So you’re starting your term all over again? You just increased your overall interest payout for the chance to pay less a month for even longer than before.

      (I’m projecting here of course, but I’m going with the economic logic that anyone desiring a 30-year mortgage is an idiot.)

Please to post comments

Comments are closed.