Where Are All the Loan Modifications?

Ever since the introduction of the Making Home Affordable (MHA) and Home Affordable Modification Programs (HAMP) were passed it was expected that the rates of loan modifications approved by banks would increase and that foreclosures would gradually decrease. In fact, exactly the opposite has happened. Foreclosures are happening at a record pace while banks continue to deny homeowners modifications on loans that should never have been approved. How did this happen and what can be done to fix it? The blame is shared by both the government and the banks themselves.

When the MHA and HAMP programs were revealed there was widespread relief among homeowners. Sure there had been panic about the rapidly falling value of homes and adjustable rate mortgages were getting out of hand, but now the government had stepped in and offered a solution. What was not known at the time was that the MHA and HAMP programs were only available to those with loans under Freddie Mac or Fannie Mae. Immediately, many borrowers were turned away by their banks and simply told, “Sorry, you don’t qualify under these terms”. As a result, letters went out to governors, representatives, senators and anyone else who would listen in a position to change these programs. The response? Nothing. In its mind, Congress had done its part. There are programs out there, people should use them.

The only problem with this is that the guidelines and subsequent red tape that ensued proved to be an almost insurmountable barrier for individual homeowners to surmount. Countless stories in blogs, interviews and news reports all tell the same tale: a homeowner contacting their bank to try a loan modification, being yanked around from different agents and offices and being told conflicting updates on the process, all while time ticks down on their property being foreclosed. Banks are not required to tell homeowners why their loan modification has been turned down, and there are few set guidelines or criteria that the government requires banks to conform to. After meeting a few basic guidelines, it is entirely up to the individual bank on whether to approve a loan modification or not. All this has done is increase the confusion of the process by introducing conflicting accounts of what situations qualify for a loan mod.

It is little known that banks receive subsidies from the government under these programs for setting a borrower in a “trial loan modification”. This is a program in which the bank lowers the payment due on the loan while they review placing the borrower into a permanent modification. There is no guarantee of a permanent settlement on the debt, and yet the bank still receives money from the government merely for thinking about helping someone.

The fact remains that the government programs that have been passed are severely flawed, and the banks have been taking advantage of them. The loopholes, restrictive and yet ambiguous guidelines and the banks’ general refusal to get things done has left us in a situation little better than before the government programs were passed. It is up to our lawmakers to set things right by providing programs the general populace can use and understand without having to worry about being manipulated once again by their financial institutions.

If you need help, our experienced loan modification Attorneys are available to help you at www.CallALMS.com.