The Home Affordable Modification Program (HAMP) expired December 31st.  After eight years of assisting underwater homeowners save their homes from foreclosure, the program has now ended.

Approximately 10 million homes were lost to foreclosure in the past decade.  HAMP helped lessen the mortgage meltdown, but its job is now complete.  Foreclosure sales have diminished and home prices are now almost equal to the market prices just prior to the housing market bubble bursting in 2008.

So now what?

According to the folks I chat to in the foreclosure industry, expect mortgage service companies to tighten standards and foreclosures to gradually increase during 2017.

Without HAMP, homeowners seeking loan modification will be left at the mercy of lenders.”  Dillon Graham, Florida foreclosure defense attorney.

The Consumer Financial Protection Bureau has issued lending guidelines to help reduce the number of foreclosures in the future, including an emphasis on loan affordability, but those guidelines will do little to help current homeowners who fall behind on their mortgage payment.

I expect to see a new foreclosure trend emerging in 2017:

  • Banks will be quicker to initiate foreclosure actions when a homeowner falls 2 to 3 payments behind.
  • Foreclosure Forbearance Agreements will emerge from an 8-year hibernation and be the primary loss mitigation tool offered by mortgage lenders.
  • Chapter 13 bankruptcy case filings will increase as it provides the the best option to give homeowners 3 to 5 years to cure delinquent mortgage payments.
  • Foreclosures on long-forgotten 2nd mortgage debts will pick up as surging home prices enable banks to recoup some recovery for loans previously underwater.

This cat is now away.  Time for the mice to play again?


Image courtesy of Flickr and frankieleon.