Two reports out of Washington Wednesday paint very different pictures of the government’s response to the nation’s mortgage foreclosure crisis.
One, the monthly Treasury Department report on the progress of the administration’s Home Affordable Modification Program, shows loan servicers are stepping up their efforts to convert more delinquent borrowers into more affordable mortgages loans.
The other, from the Congressional Oversight Panel, said that despite several measures taken by Treasury to improve HAMP’s chances of success, it will fall far short of its goal of helping 3 million to 4 million homeowners.
In the Chicago area last month, 39,914 homeowners were in active trial modifications and another 11,333 homeowners had received permanently modified loans since the program’s start, according to Wednesday’s Treasury report. However, while the number of homeowners whose trials plans were made permanent increased 40 percent in a month’s time, the number of consumers in active trial modifications fell to 39,914, from 43,215 in March.
A drop in active trial modifications was expected nationally. Beginning June 1, the government said consumers applying for a trial modification would have to provide full-documentation of their income verification, but many lenders began applying that requirement in March.
The number of canceled trial modifications rose to 155,173 last month, compared with 88,663 cancellations in February.
Nationally, the Treasury Department said of the 1.2 million HAMP trials begun since the program’s inception more than a year ago, 230,801 have been made permanent. That compares with 168,000 in permanent loan modifications in February. A loss of income was cited as the predominant reason for almost 60 percent of permanent modifications.
The Congressional Oversight Panel, which last looked at the administration’s foreclosure programs in October, said it was concerned that Treasury’s various tweaks to HAMP, making it more palatable to loan servicers and investors, might cause them to delay modifications as they wait for an even better deal. The panel also expressed its concern that more taxpayer funds were being set aside for foreclose programs than were being set aside to ensure that more homeowners didn’t fall into foreclosure.
“For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes,” the panel’s report states. “It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble.”
The report also noted that loan servicers typically do not reduce mortgage principal balances, so even with a loan modification, borrowers would owe more money on their homes than the homes are worth. That might cause them to re-default on the modified loans. By Mary Ellen Podmolik |
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