The results to date from MHAP are deeply disappointing. Even the most optimistic view of HAMP and HARP’s potential would now project the programs as having only a minor impact on the foreclosure crisis. Until and unless the problems of unemployment; negative equity, and servicer capacity, incentives, and contract restrictions are addressed, we are unlikely to see noticeably different results. These issues cannot be addressed within the current structure of HAMP.
Unfortunately, none of the solutions for foreclosures due to unemployment are particularly satisfying, and without addressing unemployment, foreclosures will remain at elevated levels. Bankruptcy presents possible solutions to negative equity as well as to servicer-side problems of capacity, incentives, and contractual restrictions, as it removes servicers from the modification business. A bankruptcy solution is not a silver bullet that will end the foreclosure crisis, but if negative equity and servicer-side problems can be successfully addressed, it will result in significant progress in foreclosure mitigation.