So, the federal loan modification programs Home Affordable Modification Program and Making Home Affordable have been out for almost a year now. What’s the verdict?
By just looking at the numbers, the results have been less than encouraging. According to HAMP, there are anywhere between 3-4 million borrowers that qualify for the HAMP program. Out of those, about 1 million have been extended loan modification offers, trial or permanent. Of those offers, 110,000 loan modifications have been successfully converted to permanent status.
However, it’s important for anyone looking at these figures to remember a few things. First off, although HAMP was brought out in March of last year, many banks did not establish their HAMP loan modification infrastructure until later in the year, even up until August and September. Considering that most loan modifications must go through a 3 month trial period before being approved for a permanent modification, there hasn’t really been enough time to form a clear judgment on the program.
During that time, the HAMP subsidies toted by the government as incentives for banks to modify loanswere being handed out to any bank that placed a troubled loan into a trial modification. This is important because banks suddenly had a huge cash cow to milk for practically no effort. Banks are not required to approve trial loan modifications for permanency even if the borrower makes all the payments are time. In a previous article, I wrote about the curious coincidence between the federal government requiring banks to approve permanent modifications before receiving funds and the rate of permanent modification approval skyrocketing. Hopefully the trends shown by Bank of America will extrapolate to the other banks and continue on so people are getting the help we paid for.
If the results we’ve seen from BofA and other banks continue along at the pace of the last couple months for any significant amount of time, I think it would be safe to say that the program has been a success. Maybe not the complete turn around that some were expecting, but far better than the results of doing nothing.
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