Delays Reported in Making Trial Loan Modifications Permanent

By:
Peter King | November 11, 2009

With more than 650,000 trial mortgage loan modifications now under way, the Obama administration’s Making Home Affordable Program (MHA) appears to be gaining momentum after a slow start. But there are new reports that relatively few of those are being converted into permanent status, even after the three month trial period has ended.

In its monthly status report on the MHA program, the administration indicated that another 150,000 trial loan modifications were initiated in October, a pace that has been quickening since last summer.  Loan modification activity was up among nearly all participating loan servicers, including significant increases among many that had previously been lagging.
 
With trial modifications now underway for approximately one-fifth of the up to 4 million homeowners the program was originally projected to reach, the initiative is on track to meet its goals, administration officials said.
 
"The program is having a pronounced impact in areas particularly hard hit by the housing crisis,” said Treasury Assistant Secretary Michael Barr. “We're reaching borrowers at a larger scale than any other modification program to date, but there is still much more work to be done."
 
However, it appears that only a fraction of those trial modifications have been made permanent. The Wall Street Journal reports that problems with documentation are preventing many borrowers from obtaining permanent modifications even after their three-month trial phase has been successfully completed.
 
It’s unclear what’s causing the problems with documentation. J.P. Morgan Chase reports that out of 92,000 customers that have completed the three-month trial period, only one-quarter have submitted the required documents for making their modifications permanent. However, borrowers are complaining about foot-dragging by lenders and repeated requests for additional documents that drag the process out for months.
 
The administration has not yet released any information on completed trial modifications and is not scheduled to do so until December.
 
The Making Home Affordable loan modification program is designed to help financially stressed homeowners avoid foreclosure by reducing their mortgage payments to a more affordable level. Begun last spring, the program was slow to get off the ground as lenders developed procedures for implementing the program and sought clarification on program guidelines, but has since then gained momentum.

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