A Loan Modification Program’s Limited Reach

Written By: Glenn Michaels

Federal inspectors are taking the United States Treasury Department to task for not doing enough to increase participation in the government’s Home Affordable Modification Program (HAMP) which helps keep homeowners out of foreclosure. Borrowers having trouble paying their monthly payment can apply for a HAMP for a loan modification that lowers their monthly payment. So far, 1.5 million homeowners have received HAMP modifications, about half as many as originally predicted by the Treasury. The department has repeatedly extended the program’s initial December 2013 deadline; HAMP iis now scheduled to expire in December 2016.

In its latest quarterly report to Congress, the office of the special inspector general  for the Troubled Asset Relief Program, the 2008 financial bailout plan that included HAMP, says the deadline extension is not enough. The report calls on the Treasury to step the outreach efforts, particularly in states where homeowners have been “underserved” by the program. In certain states, the report says, foreclosures have outpaced HAMP modifications by much greater margins than in other states with higher participation rates. The states ranked as most underserved are: Oklahoma, North Dakota, Michigan, Arkansas, Alaska, Iowa, Tennessee, Indiana, Kansas and Texas, (New York has fewer than two foreclosures per HAMP application.)

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The report says these states have also received “the least outreach” about HAMP. For example, in six of the underserved states, the Treasury has not held a single community outreach event, in which distressed homeowners can meet directly with housing counselors and mortgage servicers.

Also the report said, many of the underserved states have received little or no funding for housing counseling agencies in support of HAMP; And the Treasury has not supplemented the paid advertisements in those states to raise participation in HAMP. Moving forward these states clearly present opportunities for Treasury to find more struggling homeowners to apply for and enter HAMP, and to help them avoid foreclosure.

The chief of the Treasury’s Homeownership Preservation Office, said officials had yet to see an increase in defaults from the roughly 60,000 loans that have reached their first rate step – up. The median payment increase is about $95.00 a month. The chief noted changes made last year to help mitigate the increases. Borrowers who stay current on their modified loan for six (6) years receive up to $10,000.00 in incentives toward their principal balance. Borrowers in danger of default may be evaluated for a second modification at a reduced rate.

Every day I see and hear television and radio advertisements for borrowers to contact attorneys that specialize in HAMP and foreclosure bail outs. I have personally worked with borrowers who want a HAMP modification and their mortgage servicer has given them a very difficult time to get the HAMP modification due to so many contradictory guidelines.

About The Author

Glenn Michaels - As an NAMP® staff writer, Glenn Michaels is a mortgage underwriting instructor for Mortgage Underwriter University (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.


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