In view of the disaster HAMP has become, Wells Fargo (NYSE:WFC) was recently asked by president of NAB Research when the program would end for them, considering they have about 15,000 people working on and in it.
Nancy Bush, the NAB Research president, said the response was, “They just shrugged their shoulders and said maybe never.”
Bush added the the expenses associated with the failing HAMP initiative is probably more expensive than any other undertaking the banking industry has ever participated in. “HAMP hasn’t worked,” said Bush, and she added the amount of capital and time used to attempt to make it work has been extraordinary.
Industry watchers say the government will spin it differently, but the reality is HAFA is an admission that HAMP has been a dismal failure.
How HAFA will work, is those who own homes but don’t qualify for a loan modification under HAMP will be offered a chance at what is called a short sale. A short sale refers to an agreement between the mortgage provider and borrower where the provider offers the home for sale for less than its valued at or less than the loan currently on the property.
For the HAFA program, the problem with these short sales or the alternative deeds in lieu, is borrowers won’t be held responsible for mortgage shortfalls, and if the home is sold for less than it is valued at, the bank will be left to pick up the tab; another potential disastrous situation.
This is why the government just needs to stay out of the market. Its continual interference creates more and more problems, which demand other solutions which otherwise wouldn’t have been there in the first place.
After banks trying to work under the HAMP guidelines, all it has done is cost billions of dollars with relatively few successes in proportion to the time and effort put into it.
The bottom line for banks is they’re going to get stuck with a lot more expenses from this new program, which from the looks of it, already has everyone involved getting set up for failure.
Bush concluded that HAFA will need to include provisions for the government helping banks if it takes up. In other words, the taxpayers will have to pay for those who took out the loans; in many cases irresponsibly.
The system should have been allowed to flush itself out like I’ve mentioned many times before. This endless attempt by politicians to make it look like they’re bringing salvation to everyone is beginning to look even more reckless than before, as there seems to be an element of messianic identity by the government which is trying to play god.
HAMP has already failed and HAFA will too. How many billions will it take before the government stops its outrageous interference and the market just takes care of business like it is more than capable of?
