We've discussed the problems with Making Home Affordable, the administration's anti-foreclosure plan before; despite a smart structure, its lack of enforcement structures and a worsening housing market has led to a less-than-promising inauguration. One new solution that has been suggested is letting borrowers pay rent instead of face foreclosure. But now ACORN has produced a solid white paper [PDF] on how to fix Home Affordable's Modification Program (HAMP).

While the need for better enforcement mechanisms -- some kind of sticks to go along with the various incentives and ensure that mortgage services actually follow the new rules -- has been clear for a while, one overlooked aspect of the program's problems have been the worsening housing and employment markets:

HAMP guidelines do not account for rising unemployment and falling property values. Any homeowner who falls 90 days behind on a HAMP modification is automatically terminated from the program, including homeowners who are laid off or have their work hours cut back. Currently, any HAMP modified loan which becomes over 90 days late is terminated from the program. The administration should permit the re-entry of a re-modified loan once timely payment is reached. Furthermore, where a homeowner has a viable modification proposal, but fails to meet a standard, such as the net present value (NPV) test, the administration should pressure the servicer to waive these requirements (which in many instances, is permissible under HAMP) to keep the homeowner in his home.

This report, which has a lot of good ideas, was timed to coincide with a big meeting between government officials and mortgage servicers intended to chide them into putting more effort into the project, but I'm not sure that increasing capacity to deliver loan modifications will ultimately solve the problem if those mods aren't particularly good.

-- Tim Fernholz

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