WASHINGTON — The Obama Administration is pushing back against a recent news report that concluded U.S. taxpayers will subsidize the roughly $25 billion mortgage settlement.
According to the story, which appeared in the Financial Times, the five large mortgage servicers that are parties to the settlement will be able to count actions they take under the administration's three-year-old loan modification program toward their settlement obligations. The FT reported that state officials opposed this aspect of the plan, but federal officials pushed for it.
The loan-mod program — known as the Home Affordable Modification Program, or HAMP — uses tax dollars to provide incentives to loan servicers and investors to make mortgage payments more affordable, including through the use of principal reductions.
In a blog post Wednesday, officials at the Department of Housing and Urban Development argued that there is no taxpayer subsidy of the mortgage settlement.
"For HAMP modifications that do include principal reduction, servicers only receive credit for the portion of the principal reduction that they themselves pay for, not for the portion covered by incentives in the program," the blog post states.
"In other words, if a servicer receives a HAMP incentive of 40 cents for every dollar of principal reduction, it can receive credit at the applicable rate on the remaining 60 cents."
HUD also pushed back against the idea that the settlement may have been designed to boost HAMP's numbers, which have fallen well short of the administration's original goals.
"Whether people are helped through HAMP or through the settlement, this is not about who gets to take credit. It is about trying to stabilize a housing market that has been a drag on our economic recovery with all the tools we can muster," the blog post states.
The settlement agreement, which was announced on Feb. 9, has still yet to be finalized. The settlement's website states — as it has for the last 13 days — that the agreement is coming soon.