Mediocre Program Response, Forclosure List Still Growing

Four months after the Obama Administration launched the Making Home Affordable program, it has yet to show some progress towards its goal to stem the tide of properties on forclosure list.

Government data showed that so far, the federal program barely attracted a fraction of its 4 million target. Foreclosure mitigation counselor Tammy Thompson said that the federal program is a godsend to distressed homeowners, adding that she is trying to convince her clients to get into the program.

The program was launched by the Obama Administration in March as part of the government’s financial bailout plan which was adopted in October last year. The $75 billion initiative aims to contain the number of properties on forclosure list by encouraging lenders and banks to modify terms of mortgage loans to make them affordable for distressed homeowners.

This month, the program has started restructuring nearly 270,000 distressed properties, according to the Department of Treasury. The department noted that the July figures were more than twice the 122,000 troubled loans that were modified in June under the program. However, the numbers fell short from the department’s target of helping 4 million homeowners save their properties from repossess.

Concept Capital’s Washington Research Group policy analyst Jaret Seiberg expressed his skepticism that the program would achieve its goal of stemming the tide of homes on foreclosure list. He pointed out some challenges the program is facing, including difficulty in monitoring and the success of loan modification on homeowners who lost their jobs.

Meanwhile, Action-Housing foreclosure prevention specialist Dan Sullivan said that a mortgage could not be successfully modified if it is too big for the homeowner to begin with, adding that the program would not work on a badly underwritten loan.

Under the program, the federal government is offering cash incentives to mortgage servicers who successfully modified a loan. For every borrower whose loan was modified, the mortgage servicer will stand to receive $1,000. The same amount will be received by the mortgage servicer for each succeeding three years that the borrower remains current on his modified loan.

So far, 25 of the country’s largest home mortgage servicers have joined the program to stem the tide of properties on forclosure list, including CitiMortgage, National City, Wells Fargo and Bank of America.

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• Study Modification Not Enough to Stop House Repossession