Tuesday, May 18, 2010
Mortgage Aide leaves some worse off
An Article from the May 18, 2010 Wall Street Journal
The government's mortgage-modification program has left some struggling homeowners worse off than they were before.
The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration's 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn't provide all the financial documents needed to qualify or were found to be ineligible.
Homeowners are first offered trial modifications under the program, which provides incentive payments to loan servicers, investors and the homeowners. If borrowers make the payments and satisfy other criteria, those trials are made permanent, ensuring a cut in payments for five years.
Did Bankruptcy Reform Lead to More Mortgage Defaults The Maddening World of Mortgage Modifications While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.
Some borrowers had unrealistic expectations about loan-relief programs, which were never designed to prevent all foreclosures. Another big problem is that banks often take six to 12 months to determine whether applicants are eligible.
Some win modifications, cutting monthly payments by hundreds of dollars. Others who ultimately can't get modifications at least are allowed to stay in their homes for months, making either no payments or reduced payments.
Eager for quick results, the Obama administration last year prodded banks to start people on trials without first obtaining documents proving they were eligible. That has led to many crushed hopes. The Treasury earlier this year changed its rules and told banks to start trials only after getting documents that proved borrowers qualified.
The Treasury said in a monthly report on the government's $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.
Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don't have enough income to support even reduced loan payments; others give up before completing the paperwork.
On average, it takes seven months to resolve a borrower's situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can't keep up with the demand for help, she said.
WEITZ: The HAMP program, the centerpiece of the government foreclosure assistance, has been largely ineffective. For some with steady income, it can be a valuable tool. That said, when deciding whether to pursue such an option, it is important to be realistic about your ability to repay the loan. For some, it is simply better to walk away and save the cash.
For more information on the Foreclosure Crisis, consider contacting a Seattle Foreclosure Attorney.
Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033
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