The Obama administration has extended its signature loan modification program for two years to help more families avoid foreclosure.
Launched in 2009, the Home Affordable Modification Program has assisted 1.6 million struggling borrowers through loan modifications, principal reductions, short sales and deed-in-lieu transactions.
The housing market is gaining steam, but many homeowners are still struggling, said Treasury Secretary Jacob Lew.
The HAMP program forced servicers to significantly reduce monthly mortgage payments by 20% or more so borrowers have a better chance of remaining in their homes. This reduced redefault rates. Before HAMP, most modifications actually increased the borrowers monthly payments.
Extending the program for two years will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry, said HUD Secretary Shaun Donovan.
The HAMP program was due to expire at the end of this year. Earlier this year, consumer groups and legal aid attorneys urged the Treasury secretary extends the program that continues to provide modifications for around 15,000 delinquent homeowners a month.
The foreclosure crisis is not yet over and we ask that the Treasury Department prevent the HAMP program from ending in just nine months, according to a joint letter signed by 40 groups.
The letter points out that HAMP modifications provide deeper payment relief and perform better than proprietary modifications. And HAMP mods also facilitate principal reductions on non-Fannie Mae and Freddie Mac loans.
The Treasury Department uses the monies from the Troubled Asset Relief Program to fund the HAMP program.