In an assessment from the Special Inspector General for the troubled “Troubled Asset Relief Program,” fully 46 percent of homeowners who got 2009 loan modifications from the Home Affordable Modification Program have now re-defaulted on those loans. One might ask oneself “When will we ever learn?” It amounts to “tough love” to know where to draw the line between helping those who can reasonably take on a mortgage and those who should not.

“This is a program where there’s not enough people being helped,” Christy Romero, special inspector general for SIGTARP, told Reuters. “Ultimately, the Treasury needs to make good on its promise that TARP is not just a bailout for the largest financial institutions but it will also help bailout homeowners.” That is certainly how it seems to have worked out so far. Those who helped cause the problem get a big fat bailout and those who need the help get a long list of forms to fill out and long lines to stand in.

“There will always be an inherent risk of homeowner re-default rate in a program like this given the very difficult circumstances that people who need modifications face,” the official said. “The longer they are in there, the less likely they are to re-default.” One might also add, the more we apply sound criteria to determine who should be encouraged to pursue a loan in the first place, the less likely they are to default.

“Exactly why people are falling out of HAMP isn’t well understood by Treasury,” said Romero. “If re-defaults are happening at an alarming rate, then you’ve got to stop that and change the program somehow where you stop the trend.” Unfortunately, this is one of the problems of a program being administered by a large, bloated bureaucracy that can in now way “turn on a dime.” Sometimes it can not turn at all. It seems to take years just to figure out if there even is a problem let alone what to do about it.

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