The Obama Administration’s mortgage modification program is seeing an increasing dropout rate, with 96,025 additional cancellations out of payment-reduction trials reported for July – that leaves about 52 percent of the 1.3 million targed borrowers in either trials or approved status.
In July, the total number of cancellations out of trials in the Home Affordable Modification Program jumped 18 percent, while the number of approved permanent modifications increased 8 percent to 255,934.
Total cancellations through July out of trials are at 616,839 in the taxpayer-funded program that gives incentives to mortgager servicing companies to reduce the monthly payment of those facing foreclosure. Another 12,912 have dropped out of permanent modifications after having made it through the trial phase.
HAMP launched in April 2009, but it has repeatedly come under fire by Congressionally-appointed watchdogs, borrower advocates, Republicans and those in the mortgage industry for failing to stem the tide of “underwater mortgages.” The watchdog over the bailout program that funds HAMP said administrators should require more mortgage servicers to reduce loan principals to improve the program’s effectiveness.
HAMP has also been plagued by paperwork delays and a sluggish economic recovery with persistently high unemployment that fuels the modification trial cancellations. Homeowners are eight falling deeper into debt or not having sufficient income, while others fail to comply with documentation and other requirements.
“While the pace of program entry has slowed due to upfront documentation requirements in place since June 1, this policy change streamlines the process to help more eligible homeowners convert to a permanent modification,” the U.S. Treasury said in a statement Friday.
Treasury officials also gave the following “August Housing Scorecard” key data on the health of the housing market:
- Stabilizing housing prices drive improving expectations in some regions. After 30 straight months of decline, home prices have leveled off in the past year; futures indices have shifted upward since January 2009 as signs of recovery continue, although overall housing outlook measures remain mixed.
- More than twice as many modification arrangements begun compared to foreclosure completions. More than 3.15 million modification arrangements were done from April 2009 through the end of June 2010. This includes more than 1.3 million trial Home Affordable Modification Program (HAMP) modifications started, over 472,000 Federal Housing Administration (FHA) loss mitigation and early delinquency interventions, and 1.4 million proprietary modifications under HOPE Now. The number of agreements offered continues to more than double foreclosure completions for the same period (1.24 million).
- More than 4.2 million families have benefited from housing counseling since April 2009. Working with a HUD-approved housing counselor can help borrowers manage debts apart from a mortgage – car payments, credit cards and personal loans, for example – and help them avoid falling into default.
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