PROVEN LOAN MODIFICATION SYSTEM
- By: Gerald Allen
Two-thirds approved in last two months
Approximately two-thirds of all permanent modifications under the program have been approved in the last two months, after the Obama administration stepped up pressure on lenders to finalize decisions on homeowners who have completed their three-month trial loan modification periods.
Nearly 89,000 trial modifications have been canceled, primarily due to homeowners being denied permanent modifications. Another 1,500 permanent modifications have been canceled.
The figures were contained the Treasury Department’s monthly report on HAMP, released Friday. The department says the program has reached 34-45 percent of its goal of providing 3-4 million homeowners with trial modifications by 2012. That appears to be a slight retreat from the program’s original objectives, which stated its goal as helping 3-4 million homeowners avoid foreclosure through loan modifications, without the “trial” modification qualifier.
Homeowners accepted into the program must complete a three-month trial loan modification before they can be approved for a permanent modification with the same terms. Homeowners accepted for the program have the terms of their mortgages modified so they are paying no more than 31 percent of their gross monthly income for their mortgage. Approval for permanent modification status extends those terms for five years.
Delays still far exceed approvals
The program has been beset with delays since its inception, with homeowners first complaining about delays in being approved for trial modifications and more recently about delays in being approved for permanent status after completing the three-month trial period. Of 697,000 trial modifications under way three months ago (in the November report), 558,000 had not been approved for permanent loan modifications as the February report.
Even though some of those are likely among the 89,000 trial modifications that have been cancelled, that leaves at least 470,000 borrowers who have been in trial medications at least three months without being approved or denied for permanent status, or nearly three times as many as have been approved.
Participation in the government-supported program is voluntary for lenders, who follow federal guidelines in determining eligibility for trial and permanent modifications.
The Treasury Department reports that homeowners approved for trial or permanent modifications are saving an average of $500 a month on their mortgage payments, compared to pre-modification. Separately, the department reported that another 4 million homeowners with mortgage backed by government-supported entities (Fannie Mae, Freddie Mac or Ginnie Mae) have been able to refinance their mortgages owing to low rates and refinancing flexibility, saving an average of $150 a month.
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