The Treasury Department announced in October that, after a slow start last spring, its Making Home Affordable loan-modification initiative has resulted in about 500,000 trail modifications. The department said the $75 billion centerpiece of its anti-foreclosure efforts was on track to meet its goal of offering at least five years of lower payments to as many as 4 million stressed out borrowers.
Trail modifications had topped 650,000, the government still has not said how many of those loans have been permanently restructured. the Treasury Department says such numbers will be in next month's report, which has been allocated $75 billion from the government's $700 billion Troubled Asset Relief Program bailout fund.
Paul Leonard, California director for the Center for Responsible Lending, a Durham, N.C. based advocacy group stated "You can't claim victory at 500,000 trail modifications and then have half of them drop out".
As of Sept. 1, more than 350,000 trail modifications begun, the program had achieved just 1,711 permanent modifications, the over sight panel created by the TARP legislation reported, citing nonpublic Treasury data.
Speaking to a Mortgage Bankers Assn. conference in San Diego, Laurie Anne Maggiano, director of policy at the Treasury's Office of Homeownership Preservation, said the government also had simplified paperwork for borrowers, who must make their reduced payments on time during the trail modification, submit an account of their financial hardship and document their income with pay stubs or tax returns. She also stated that the government has addressed the slow conversions by giving mortgage customer service operations five months to make trail modifications permanent, up from three months originally.
Exactly what is holding up the conversions depends on whom you talk to. The lenders say the main obstacle is borrowers who don't properly complete their paperwork. On the other said of the transactions are the borrowers and loan counselors, who say servicers make multiple requests for the same thing, lose documents again and again, and change their requests for information in midstream.
The government program, mandatory for banks that accepted federal bailout funds, was announced Feb 17, with its details unveiled the following month. It emerged amid wide spread complaints that loan servicers were slow and inconsistent in modifying loans to keep borrowers in their homes, even though the lenders acknowledged that a foreclosure can give the mortgage holder a six figure loss.
The initiative seeks to hold servicers accountable by providing a standardized format for restructuring loans and reporting progress on the efforts. It targets borrowers who are struggling to make mortgage payments that exceed 38% of their gross income.
Ambitious as the attempt sounds, the TARP oversight panel says the Obama program appears too limited in scope and scale. Meanwhile, the number of homes at risk foreclosure continues to rise.
Comments(2)