For those of you who may not know, there was recently a hearing held before Congress on the effectiveness of the Home Affordable Modification Program (HAMP), which is run under the auspices of the Department of the Treasury and the Department of Housing and Urban Development.
The real truth is that HAMP is a complete failure.
The default rate is over 1/3 and is climbing very rapidly. The re-default rate for just the refinancing granted in 2009 is at 53%, I expect the future default rate to grow to be much higher.
It was revealed in the hearing that the estimated number of 4,000,000 borrowers who used the program is not accurate. The real number is a fraction of that estimate. As a taxpayer, I find this news to be very distressing and disheartening considering the millions of dollars wasted and the promises unfulfilled.
This is a great opportunity for the individual investor.
This data supports the role of private investors as providing the best solution for handling distressed housing. Quite honestly, reality needs to be delivered to each of these homeowners who are struggling or have already fallen behind on their modifications. They need to downsize to housing they can truly and realistically afford. The housing they are occupying needs to be re-purposed, renovated, and put back on the market. This is best accomplished through the role of individual private investors working neighborhood by neighborhood, street by street.
On the national scale, the National Real Estate Investors Association is continuing to lobby to make it easier for these underwater home owners to be able to sell their properties and avoid getting clobbered with an IRS tax bill for phantom income.
National REIA, through its varying lobbying efforts, is making the case that private investors offer the best solution in resolving this ongoing and lingering housing crisis.
Look for some additional emails from me on this subject as we explore the various things investors can do to improve the housing market and the overall economy.
Boyd McClean
www.noteswilltravel.com