The Home Affordable Modification Program (HAMP) has kept over 1 million homeowners in their homes through permanent mortgage modifications. These modifications have performed very well, with over 94% of homeowners remaining active in their modifications after 6 months (i.e., paying their bills).
HAMP has also been successful in implementing major reform in the mortgage servicing industry. The program requires mortgage servicers to offer modifications rather than foreclose if the net present value (NPV) of the modified mortgage is greater than expected proceeds from foreclosure. This is basic cost-benefit analysis that requires mortgage servicers to act on win-win opportunities (when there is benefit to public welfare and benefit to the mortgage investor).
Hundreds of thousands of modification applications have been rejected because the NPV of the modification was calculated to be lower than the NPV of foreclosure. Given the successful performance of HAMP modifications, mortgage documentation problems (which lower expected proceeds from foreclosure), and continued softness in the residential real estate market, the NPV model settings should be realistically updated to allow many more homeowners to receive modifications (i.e., stop foreclosure). Offering these modifications will keep people in their homes, help solve the foreclosure crisis, and likely benefit investors.