More than half – 682,659 homeowners –of the more than 1.3 million borrowers in the Obama Administration’s mortgage modification effort have dropped out of the program as the foreclosure crisis shows few signs of abating.
The Home Affordable Modification Program (HAMP) update for August, released today, shows that 51 percent of the 1,334,117 borrowers who started trial periods of reduced monthly payments have cancelled out of the 16-month-old program.
In July, the dropout rate stood at 48 percent.
The number of borrowers in permanent modifications is 448,937. Those homeowners realize a median monthly payment reduction of 36 percent, or more than $500 per month.
But the cancellation rate has been gnawing at HAMP’s attempt to make a big dent in the foreclosure crisis. The most common causes of cancellations include: insufficient documentation, missed trial payments, or primary housing expense that is already less than 31 percent of household income, according to the August HAMP report.
The August report also says that servicers are placing more than half of homeowners from canceled trials in “alternative modifications.” Fewer than 15 percent of homeowners in canceled trials are moving toward foreclosure, the report said.
In their monthly “housing scorecard,” U.S. Treasury officials highlighted the positives of the program and stressed that more assistance is on the way, particularly $4 billion to the hardest hit U.S. regions to expand modifications or alternative programs.
“We’ve been steadily enhancing our programs to help struggling homeowners avoid foreclosure,” said Treasury Assistant Secretary for Financial Stability Herb Allison. “We understand that the foreclosure crisis can be highly localized and some regions have seen severe home price declines and faced severe unemployment.”
But critics of the program, including borrower advocates, point to the lack of substantial mortgage principal reductions.
The watchdog that oversees the effectiveness of the government’s bailout programs – which funds HAMP – has urged the U.S. Treasury to make either discretionary or mandatory a program to rescue borrowers from foreclosure through mortgage principal reductions. Currently, the alternative program is voluntary, leaving the decision up to the mortgage servicer.
Also see: Foreclosure Filings Up 4%; Bank Repos Hit New High in August
I have been working in the same field for 21 years, I recently lost my job, unable to find another, I have applied for a HAMP back in May, and I have not received help. The Wells Fargo Bank have just given me the run around, asking for all these documents, that I dig up and fax to them then they want this, then they want that, I fax it, and then they want this and then they want that, some documents I have already sent. I will get repeated automated call backs, that when you pick up the call you go straight onto HOLD PLEASE. When they finally pick up the phone the person at the other end doesn’t even know why you are being called so you have to wait till they figure that out. There is not one person handling your case, it’s like musical chairs, it’s who ever gets stuck with it at the time the phone rings. It’s like I’m being stroked along so they don’t have to pay, perhaps waiting for something else to save THEIR behind so they don’t have to take a lesser payment. No wonder there is such a high drop out rate, it’s IMPOSSIBLE to even get help, I’d rather just walk away from it all and let them take the house.
I keep seeing this situation over and over where the lender strings along unsuspecting borrowers who think they are OK until one day a constable shows and they are foreclosed on. People need to understand the mortgage institution’s rules and agenda going into the process. My web site is a DIY“Mortgage Modification system” that deals specifically with this topic.
http://www.mortgagemodificationsystem.com/rrogers/
R Rogers
It’s TRUE. They are hoping you do walk away from the house. They make more money from a fast foreclosure than an extended modification.
What they don’t want to tell you is that your arrearages are mounting in the tens of thousands while you make PARTIAL PAYMENTS into some weird frozen account that they aren’t counting against your debt. 3 month trial, 8,000. behind, 6 month trial 20,000. behind and so on. The longer they drag their feet, the bigger the bill they add to your loan.
Even though you make a payment every month and follow their instructions, you find yourself WAY behind and not able to recover the cost of arrearages when they DENY you the loan mod. 10- 12 months down the road.
Then they fast track you out and try to sell the house to someone they think can qualify for a new criteria THEY want to use. What they don’t consider is the damage to the community or families they are displacing.
Also IF at the end, they show losses on their balance sheet, that’s just for the federal government to pay them. Sometimes they recover the loss by suing the homeowner for the amount they still owe on the mortgage after the house is foreclosed. They have a WIN/WIN deal and the homeowner gets a LOSE/LOSE deal.