Even if the loan modification program ends up with 1.5 million to 2 million homeowners with new, more-favorable terms on their loans, "the program will not be a long-term success if large amounts of borrowers simply re-default and end up facing foreclosure anyway," the report said.
Neil Barofsky, the Treasury's Special Inspector General for the Troubled Asset Relief Program, said the Obama administration's $75 billion Home Affordable Modification Program (HAMP) has a definition of success that is "essentially meaningless."
Barofsky noted that when HAMP was launched in the first few months of 2009, Treasury proclaimed the program would help up to 3 million to 4 million at-risk homeowners avoid foreclosure.
More recently, the Treasury has said the 3 million to 4 million figure refers to how many homeowners would receive offers of a trial modification, not how many homeowners get an actual long-term modification.
"To be meaningful, Treasury's goal for HAMP must relate to how many people are helped to avoid foreclosure; because offers standing alone do not actually assist homeowners, it is simply not a useful measure," Barofsky wrote.
In its latest monthly report, Treasury said there were 1,003,902 active loan modifications through February and 168,708 of those have been made permanent. That was up from 946,735 active loan modifications and 116,297 permanent loan modifications through January.
But just 2.8 percent of the 6 million borrowers with loans delinquent more than 60 days have had their loan modifications made permanent through February.
And the number of homeowners with loans delinquent more than 60 days is rising far faster than the number of loans being made permanent each month.
"If HAMP ends up being a foreclosure mitigation program that merely delays foreclosures rather than preventing them, the program will be of questionable value, particularly in light of the huge investment of taxpayer funds," Barofsky wrote. (See full article)