Guiding You Toward a Brighter Future

The End of Loan Modifications?

The US Government began the current loan modification era by introducing HAMP (Home Affordable Modification Program) in March of 2009. At the time of its unveiling, the program was put in place because we were told the US economy was in great peril, many banks were facing economic catastrophe and there were talks of great finance giants even folding. When HAMP was initially introduced very few really knew how it would work. Luckily today we know a bit more about how HAMP works.

At the time however, the public was just told the US Government would work with banks and servicers to figure out the implementing HAMP evaluation. We were also told the program would remain in place until December 31, 2012 and that it was expected to help 3-4 million people modify their mortgages.

Since HAMP's inception over 100 banks have enrolled in the program, evaluating what we have been told is millions for eligibility. Many other banks have even introduced their own HAMP like loan modification programs. The result has been an estimated 1.4 million people have been placed in temporary loan modifications thus far and about 500,000-600,000 of those having received permanent modifications. According to the US Treasury however, only 3% of the funds put aside for the HAMP program have been used thus far.

Bank of America recently announced a 41% spike in Notices of Intent to Foreclose being sent out nationwide. Further, anyone dealing in loan modifications can tell you it is still extremely difficult to achieve one. The most common reason for denial being "..missing documentation..." (despite one having sent in all the documentation repeatedly). Though I must admit I have even seen lack of affordability as a reason for denial when the income used to qualify an individual is exactly the same as that which was used to qualify them for the mortgage in the first place. In short, loan modifications have been difficult to achieve even for those that know and can interpret the complex qualification process. Thus, generally speaking loan modifications have been hard to come by, as also evidenced by the number of permanent modifications in place a year and a half into the program.

Now, our government, as evidenced by the last six months, instead of trying to figure out a way to further streamline loan modifications to achieve the 3-4 million modifications, is fighting over whether or not to cut off further funding to HAMP, and maybe even the program entirely prior to December 31, 2012.. The elimination of HAMP can only mean any pressure banks currently feel to offer loan modifications would end and folks facing foreclosure would lose yet another option.

I am not an Economist but I fail to see how ending loan modifications now while unemployment is still close to 10% nationwide will help distressed homeowners or the housing sector. Further, if homeowners truly are on the cusp of going into foreclosure in greater numbers now as evidenced by Bank of America's recent report, what options do homeowners have?

Here at P&P Law our office tackles these tough issues for home owners everyday and while we can not make the ultimate decision for clients in terms of what is best for them, we certainly have enough experience with loan modification, short sale and even bankruptcies to help educate homeowners about their options. The only remaining advice I can give homeowners is act now because the time left to modify your loan is ticking away in more ways than one.

Resources:

  1. http://en.wikipedia.org/wiki/Home_Affordable_Modification_Program
  2. http://www.bls.gov/news.release/empsit.nr0.htm
  3. https://www.efanniemae.com/sf/mha/mhamod/npvtest/
  4. https://www.hmpadmin.com/portal/index.jsp