The Treasury Department's "own projections" show that "fewer than half of the projected foreclosures" will be prevented by the Home Affordable Modification Program, a new Congressional Oversight Panel report says.
Residential servicers using the Obama administration's loan modification program are ramping up to modify 25,000 to 30,000 a week, but it will not be enough to keep pace with rising foreclosures, according to the Congressional Oversight Panel, which watches over the Troubled Asset Relief Program.
The oversight panel also warns that HAMP is not designed to address defaults associated with negative equity and the coming wave of resets on interest-only and payment-option mortgages. The authors note that negative equity has become a drag on self cure rates.
Historically, "nearly half of all prime defaults would cure on their own," but now it is only 6.6%. The COP also cites research showing that 77% of payment option ARMs are underwater and 25% are seriously delinquent or in foreclosure. "It increasingly appears that HAMP is targeted at the housing crisis that existed six months ago, rather than as it exists right now," the report says.
The Interest Only and Pay Option Arms resets will last through 2012.
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