Advocates fight to keep Home Affordable Modification Program

A program that has helped almost 1,000 struggling Colorado Springs homeowners renegotiate their mortgages is under threat in Congress this week, but local housing advocates say it is too important to eliminate.

The initiative, the Obama administration’s Home Affordable Modification Program, has been dogged by administrative and legal problems since its inception two years ago, and a bill that would kill it is under review by the House Financial Services Committee this week.

The program was initially expected to help 3 million to 4 million Americans; to date it has reached only about 600,000 households, just 9,349 in Colorado and 959 in Colorado Springs.

Critics point out that a high proportion of homeowners entering the program end up defaulting anyway. There have been accusations that loan servicers have been uncooperative or slow to process requests, and reports of homeowners gaming the system and attorneys fleecing applicants.

The federal government has addressed some of these issues, but hasn’t been able to overcome one major setback: the headline numbers.

But Adams County Housing Authority Director Zachary Urban doesn’t think this a fair metric.

“One of the biggest critiques is that the program hasn’t reached the initial projected numbers, but you have to think about the people it has helped,” he said.

“We see the impact modifications have for families and individuals on the ground trying to avoid foreclosure. To say front-end projections dictate the total success of the program is not the way to look at it.”

Shannon Peer, director of Denver-based Brothers Redevelopment, agrees.

“(Colorado) had over 200 permanent modifications in January and we average 245 a month,” he said. “(Program detractors) are looking at those numbers and calling it a failure, but that’s a strange way to measure the program. That’s a lot of families that got to stay in their homes.”

Advocates say that if the program is eliminated, struggling homeowners will be left without recourse.

“If you get rid of it, will loan servicers pick up the slack by offering their own modifications?” Peer asked. “I don’t know, but they sure weren’t offering a lot of modifications prior to HAMP.”

In addition, Urban said political wrangling over the program has obfuscated the bigger picture. There have been 9,705 foreclosures in El Paso County since HAMP was launched in early 2009, and industry professionals are not expecting a meaningful decline in 2011.

“In the first two months of this year there were $340 million in loans foreclosed on at sale, and another $660 million in foreclosure actions started,” Urban said. “That’s $1 billion, and that’s just the strip of counties from Larimer to Pueblo — the figures are much bigger statewide.”

Instead of scrapping the program, supporters say changes could be made to revamp it. Recently, industry professionals noticed a shift in the kind of borrowers who could benefit from a modification. When the program launched it was aimed at homeowners that had taken on unsuitable loans. The bigger issue today is unemployment.

The unemployment rate in El Paso County is at 9.3 percent, and potential applicants need a job in order to qualify for a HAMP modification.

“We hope the unemployment picture changes; it’s been a real dragging factor, and these modifications won’t help someone who is out of work,” Peer said. “But once someone regains employment they might be a great candidate for a modification.”

One modification program that is working well in Colorado Springs is through Ent Federal Credit Union. Ent keeps and services a majority of its home loans, which has allowed it to address modifications case by case.

Ent offers the Homeowner Relief and Assistance Program (HARP), which was developed by a coalition of credit unions. Not only does the program read easier than its federal counterpart, it came out months before HAMP and targeted the underemployed and unemployed from the start.

Ent Chief Loan Officer Bill Vogeney said his firm maintains a $900 million loan portfolio and initially committed $5 million in funding to its HARP program. To date, Ent has engaged in over $12 million in HARP modifications with a success rate of around 95 percent.

Of course, Ent may be starting from a higher quality customer base.

“We always tried to make loans that made sense. We never made a pick-a-payment-option loan, a negative amortized loan or a high-cost subprime loan,” Vogeney said.

Ent will modify a loan even if the borrower is receiving unemployment benefits, something a lot of servicers don’t consider as income.

Loan servicers for HAMP have been widely criticized for the length of time it takes to process a loan modification.

“We’re local so we have a relationship with the people whose loans we’re servicing,” Vogeney said. “Our program is successful because we don’t put people through the ringer. It doesn’t take us 60 to 90 days to process a request; we can have our answers within a week.”

Vogeney echoes the sentiment that for all its flaws, HAMP is too important to be done away with. But the local solution stands out as a successful way of running things.