With 3.5 million foreclosures threatened for 2010, the Home Affordable Modification Program – hamstrung by bureaucratic hurdles – is effectively serving only a fraction of eligible homeowners. Despite some success in trial modifications, with no real bank incentive provisions and continued economic hardships including mounting job losses, the program will face an uphill battle to fulfill its promise of rescuing those at risk of losing homes.
Bureaucratic stumbling blocks and red tape have hampered the government’s mortgage modification plan, helping only a small number of Americans stay in their homes, Treasury Department officials acknowledged.
The Obama Administration’s Home Affordable Modification Program (HAMP) has permanently modified only 66,000 homeowner mortgages from more than 4-million that may be eligible for the plan. Another 46,000 modifications in the works are awaiting only the borrower’s signature.
With foreclosures forecast to top more than 3.5-million in 2010, the program is expected to undergo a major escalation to keep more homeowners in their homes. The plan is becoming another major political liability for Democrats in an election year facing stiff opposition in a series of races as more Americans turn against bail-outs and the financial industry.
President Barack Obama vowed to keep pressure up on U.S. bankers to do the right thing. “We’re not going to let Wall Street take the money and run,” the president said during his weekly radio address.
More than 850,000 homeowners have signed up for trial modifications, according to the Treasury Department. But only 15% have been converted into permanent modifications. Thousands of homeowners have complained to bankers, loan servicing companies handling the requests and the government about the program. But it seems implausible that the plan will aid more troubled borrowers before the government picks up efforts to financially incentivize bankers to help more borrowers.
A series of problems beleaguer the program, including bankers’ hesitancy to cut mortgage rates, the size of mortgages to make them more affordable for homeowners and lack of adequate personnel to handle the growing number of homeowners at risk of foreclosure.
The Treasury Department says that 75% of homeowners in trial modifications are able to make current payments for the three month trial period. But troubled by growing anxiety, financial stresses and high unemployment hundreds of thousands of homeowners have failed to return final documents needed to show hardship to obtain modifications.
The Obama Administration has taken a series of steps to ramp up the program, including the monitoring of servicers handling the modifications in offices over the last month.
However, mortgage borrowers and many inside the industry are critical of the program. “The sad thing is nothing is really working,” said O. Max Gardner III, an attorney who handles foreclosures. “The way they’re modifying the loans is not giving consumers the kind of relief they need.” Gardner favors permanent loan reductions to make payments affordable for homeowners.