The Corner

Federal Mortgage Bailout Program Sees a Quarter of Homeowners Re-Default

This story speaks for itself:

Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.

In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default. Those who have been in the program since 2009, are re-defaulting at a rate of 46%, the inspector general found.

HAMP, which was launched by the Treasury Department at the height of the foreclosure crisis, aimed to help as many as 4 million borrowers avoid foreclosure by making their payments more affordable through reduced interest rates, extended loan terms or, in some cases, reduced mortgage principals.

Not only has the program fallen far short of that goal but with each year of the program, a growing number of homeowners have re-defaulted, the inspector general found.

What’s the cost to taxpayers so far?

As of April 30, taxpayers have lost some $815 million on the permanent mortgage modifications that have re-defaulted, the inspector general reported. As part of the Troubled Asset Relief Program, Treasury allocated $19.1 billion to the HAMP program. So far, it has spent $4.4 billion, the inspector general said.

However, instead of an end for the program that has seen roughly a quarter of its beneficiaries re-default on their loans at huge taxpayer expense, this part of TARP will be extended for another two years, until the end of 2015. The whole WaPo piece is here, and here is the report from the Office of the Special Inspector General for TARP (SIGTARP).

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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