With a reported 616,000 homeowners being bumped from the Obama administration’s flagship Home Affordable Modification Program (HAMP), the supposed mortgage-relief program is said to be doomed for failure. And analysts are trying to dissect where it went wrong.

Brenda Reed, 64, from Lafayette is just one of the many who has pinned her hopes on HAMP. She said that the program only made her go through months of paperwork only to end up with more debt and a possible foreclosure.

HAMP was supposed to renegotiate delinquent mortgages and allow borrowers to hold on to their homes and stave off foreclosure. Those who enrolled in the program, though, said that HAMP only stringed them along for many months and prolonged the inevitable foreclosure.

HAMP, launched by the U.S. Treasury in March 2009, offered incentives to lenders that modify terms of mortgages on homes up for foreclosure. This seemed like a great deal for mortgage lenders as it warrants them safe from costs of foreclosures. This, however, is not always the case.

In July, only 422,000 trial modifications were escalated to permanent status and half as many were rejected from the program. This validates the complaint of most homeowners that HAMP does not resolve the problem but only prolongs the determined outcome of their problem.

General Accountability Office report on the Troubled Asset Relief Program (TARP) stated in July, “The number of trial and permanent modifications that have been cancelled substantially exceeds the number of homeowners helped. One continuing source of frustration is that the Treasury has rejected calls to announce publicly any goals or performance benchmarks for HAMP.”

Many say that HAMP is failing because everybody – mostly the government, lenders, and the banks – are in denial. Delinquent mortgages are kept off the books and this prevents additional bank failures and further bailouts resulting to pumped up housing prices that allows builders to keep working and consumers to keep spending.

Banks and lending institutions have been more than happy to play along. If they declared the bad or near-bad debts on their books, asset values would plummet and more problems will arise.

HAMP may have been cheaper as compared to supporting government-chartered lenders Fannie Mae and Freddie Mac but it was still doomed for failure. There have been way too many borrowing in the 2000s. Having too many maxed-out borrowers may mean bad risk, even with mortgage terms modified.

Mass denial is actually putting a big impediment on any possibility of economic recovery. Homeowners who are forced to hold on to underwater properties will likely reject a promising job elsewhere, stomping all hopes career mobility. Also, if realistic prices are listed for homes currently on the market, then more people will likely be able to afford them – eventually resulting to an upward trend in the market.

Facing the truth, though, can be expensive. The government would have to support lenders currently hiding behind the false-priced inventory and millions of families who will be dislocated. And with election coming up in the next few months, that is simply not an option.