RM Howard

The mortgage modification program has been under fire over the last few months because of the small number of people actually helped. That seems to be changing as the U.S. Treasury department reports that 947,000 people have seen their mortgage payments fall on a temporary basis as of the end of January under the modification program.

The Home Affordable Modification Program (HAMP) was slow to start, but the Obama Administration has been pushing lenders to provide more assistance to homeowners in trouble. A mire of paperwork was preventing many homeowners from getting relief, and as a result the procedures have been simplified in some areas and forms processing streamlined. Lenders are being asked to produce results because many consumers are experiencing nothing but frustration trying to work with their mortgage companies.

The program is incentivized by the federal government. It is estimated there are 1.7 million mortgages eligible under the current program rules. This equates to 3 percent of all mortgages. The types of modifications being made include loan term extensions and lowered interest rates. In fact, some interest rates have been cut to as low as 2 percent. The median amount of the mortgage reduction is approximately $522 each month.

The program gives homeowners a temporary reduction in their mortgage payment for up to three months. The trial period serves two purposes. The first reason is to give consumers involved in the program time to gather together the necessary documentation to prove their income and justify a permanent modification. The second reason is to give the lender a chance to see if the homeowner will be able to meet the new mortgage payment on a timely basis.

As of the end of January, the U.S. Treasury Department reports that 116,000 households have completed permanent mortgage modifications. That is a small number considering the number of applications for temporary modification. Some modifications never make it through the process because the homeowners are unable to meet the income verification requirements.

Some believe it is unfortunate that many unemployed people will lose their homes because they are not eligible for the modification program. The opposite viewpoint is that the government is not obligated to keep people in homes they cannot afford. The Treasury Department reported that 60,000 loan modification accounts have been cancelled to date for one reason or another.

Those consumers who do not qualify for the HAMP program are often faced with foreclosure or short sales. A short sale is when the lender allows the homeowner to sell the house for less than the mortgage balance. It is expected that many people will simply not be able to qualify for permanent mortgage modification.

In 2010 it is expected that close to 2 million more homes will go into foreclosure. The expansion of the HAMP program is expected to help many keep their homes, but more will be foreclosed on. Program detractors say that a number of the people losing their homes should never have qualified for the original mortgage based on their incomes.

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