Do loan modification programs help stop foreclosure?

Barely a year after its inception, the loan modification services and efforts of the federal government continues to fade away, getting farther from its goal to help stop foreclosure. With this, efforts to stimulate the program were executed including the increasing frequency of releasing report cards and updates, but these efforts appear to be unsuccessful.

Here is a sample of a progress report homeowners could use as reference. Use this as a guide or better yet, visit http://www.1stforeclosureprevention.com/ so you can be better aided in foreclosure-related matters:

Latest statistics show that over 650,000 loans were submitted to the trial modification stage where the applicants must show they are sincere, eligible and capable before they will be converted to permanent modifications. To be considered and have a chance to help stop foreclosure, the homeowners must show that they have made three payments under the new terms of the loan and submit a documentation to prove that they are legitimately entitled to be given a modified loan. This may sound simple to some, but in reality, only 30,000 of the applications under the trial modification have been converted to permanent modifications.

As a result, a lot of blame had been circulating around. The government has been blamed for not pushing for more trial modifications since an original estimate showed that there are about four to seven million eligible borrowers. Lenders, too, were blamed for taking a long time in the modifications and not granting leniency to the borrowers. Because of this delay, some of the borrowers are still paying an increased amount in their payments every month following the modification. Lenders on the other hand blamed the borrowers for failing to follow the required three payments in accordance to the policies regarding the trial modification, and for failure to submit the necessary paper works.

In his assessment, Representative Jeb Hensarling reflected on what seems to be everybody’s thoughts that foreclosure mitigation programs that are funded by taxpayers had been doomed to failure. With this, the representative is leading a campaign to abolish the program completely. Perhaps the program was doomed to fail right from the start. As a matter of fact, 25 percent of the borrowers who were given temporary modifications went on default. Other borrowers who were given modifications were not even on the list of those behind their payments. Other borrowers also deliberately delayed their payments so they will receive payments, while there are other borrowers who avoided modifications to elude the hits they will receive in their credit scores when the rating agencies receive their delinquencies in payments.

But despite all these challenges, the program is still there and refused to die. Through an executive order to help stop foreclosure, lenders cannot cancel temporary modifications that have any other reason aside from property eligibility requirements and whose expiry dates are before January 31. Programs with low interest loans can be used for the individuals who are currently unemployed to pay mortgage payments, like the one in Pennsylvania, came out. This is an alternative supported by progressive Congressman like Barney Frank. The congressman is also exerting effort to re-introduce the “cram-down” bill where judges will be given discretionary powers to modify mortgages if the need arises. The lenders have also doubled their efforts in improving their services to help stop foreclosure by adding more personnel and opening more centers dedicated especially to address issues on loan modification. Maybe there is still a bright future after all…



admin | | 02 11th, 2010 | No Comments »