The Recently Announced Revisions to the Home Affordable Modification Program (HAMP)

Chairwoman Waters delivered the following opening remarks during a Subcommittee on Housing and Community Opportunity hearing, "The Recently Announced Revisions to the Home Affordable Modification Program (HAMP)": 

"Good morning ladies and gentlemen.

I would like to thank the Ranking Member and the other Members of the Subcommittee on Housing and Community Opportunity for joining me today for this hearing on "The Recently Announced Revisions to the Home Affordable Modification Program (HAMP)."

Without objection, Representative Melissa Bean will be considered a member of the Subcommittee for the duration of this hearing.

Today's hearing will again revisit the Administration's program to prevent foreclosures.  This is the third Subcommittee hearing on the topic since the Administration announced the program just over a year ago. 

In that time, we've seen about 1.4 million trial loan modifications take place, but only 230,000 modifications have been made permanent.  At the same time, performance on home mortgages serviced by the largest national banks and thrifts continued to decline through the end of 2009.  While foreclosure activity decreased from January to February of this year, the February 2010 numbers were still 6 percent higher than the numbers from February 2009.
 
So I am pleased that the Administration addressed something that had long been clear to me and many of us in Congress – the original HAMP program was not doing enough to address the foreclosure crisis as it exists today.  While the original program helped borrowers get lower interest rates, it did nothing to address the concerns of unemployed homeowners or "underwater" borrowers.

In my hearings, my conversations with agency and bank officials and my discussions with homeowners impacted by these policies, I have advocated for stronger foreclosure intervention programs.  In December of last year, the Wall Street Reform and Consumer Protection Act included a provision I authored to provide $3 billion in assistance to unemployed borrowers nearing foreclosure – a much more robust program than what the Treasury Department has proposed.  I hope that a provision similar to what I authored will be included in the Senate's Wall Street reform bill.
 
And I have likewise been a strong proponent for principal reduction programs, seeing the devastation in Los Angeles.  A recent study by First American CoreLogic estimated that the average borrower in Southern California would not get out from being "underwater" until 2016.

So I am curious today to hear from the Administration and from advocates about how these new initiatives will address these pressing issues, though I am concerned that these programs won't be operational until the fall.  I am also interested to hear the Commissioner elaborate on how these policy changes will impact FHA's capital reserve level, given the important legislation I am crafting to address that issue.

And I am also interested in hearing from advocates about what we should expect from these new initiatives – will it be enough, or do we need to mandate that these banks take steps to more seriously assist homeowners? 

Increasingly, I am unconvinced that these voluntary programs are going to provide the assistance that homeowners desperately need.  I find it curious that some major banking institutions have said publically that principal reductions for struggling homeowners are unfair and cause market distortions. However, when these financial institutions find themselves underwater on their own real estate investments, they themselves often stop making payments. For example, Morgan Stanley recently decided to stop paying on five underwater office buildings in San Francisco.  And when the Mortgage Bankers Association found itself underwater on its headquarters, they were able to rely on other lenders to get out from this unsustainable mortgage; unfortunately, it seems that many of their members oppose giving homeowners the right to do the same.

And I also remain troubled by the behavior of servicers, who continue to construct barriers for some in search of loan modifications.  I will continue to demand more accountability for servicers, and will work with Chairman Frank to enact mandatory loss mitigation legislation.

I would now like to recognize our Subcommittee's Ranking Member to make an opening statement."

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