About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under HARP Program Loans or The Obama Refinance Program

The Obama administration’s Home Affordable Modification Program (HAMP) started pretty strongly out of the gate, but recent evidence indicates the program has been losing steam. We get this from a recent HousingWire article:

The Treasury Department’s Home Affordable Modification Program is dwindling.

According to data released last week from the Office of the Comptroller Currency, lenders started 43,739 new, three-month HAMP trials in the third quarter, down 84% from the peak of 272,709 a year ago.

New trials have been on the decline ever since lenders reported, on average, 57,000 fewer trials than the quarter before. The biggest drop came in first quarter of 2010, when lenders offered 118,000 fewer trials than the previous quarter.

“I think the program is turning out to have a lot less impact on the market than we thought it would have,” said Sen. Ted Kaufman (D-Del.), chairman of Congressional Oversight Panel after it released a scathing report on HAMP last month.

The Treasury launched HAMP in March 2009 to provide an incentive to servicers for the modification of loans on the verge of foreclosure. At the time, the Obama administration said the program would help 3 million to 4 million homeowners avoid losing their home. Under such political pressure, servicers began putting homeowners into three-month trials without checking for documentation.

When a backlog began forming, administrators put renewed emphasis on converting more into permanent modifications, while the Treasury changed the rules prohibiting a new trial until all the documentation was in from the homeowner.

The upshot of it all is that loan modifications just aren’t easy to come by — even with the federal government encouraging them. In addition, there are lots of stats out there indicating that people who do get loan modifications tend to re-default at an alarmingly high rate.

What have lenders been doing instead of modifying loans? Well first lenders will try to get borrowers to just take their lumps and keep paying. In many cases where borrowers fall behind on payments lenders are forging ahead with foreclosures again. However the average foreclosure has been taking something like 18 months to complete from the first late payment. Last, lenders have been accepting short sale offers at a more often and more quickly. Banks accepting a short sale on underwater homes where payments are delinquent has proven to be a good compromise that allows the borrower to get out of the underwater home and allows the lender to save time and money by avoiding the expenses of foreclosing.

Should you still seek a loan modification if you can’t qualify for a refinance? Absolutely. But it appears that loan modifications are getting harder to get lately. Contact us in the sidebar to learn which programs will best fit your situation.

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