Enrollments in Loan Mod Program Dwindle
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- Kara Johnson | August 20, 2010
The number of homeowners entering the government’s Making Home Affordable mortgage loan modification program has fallen to a new low, even as new foreclosures are increasing.
Only 24,600 homeowners began trial loan modifications under the program in July, down from 38,700 in June and the lowest rate since the program was launched in April 2009. The number approved for permanent loan modifications after completing their trial period also fell, to 36,700, down from 51,200 the month before.
At the same time, new foreclosures edged up slightly for the month, increasing to 97,200, up from 96,200 in June, but still well below the level of 134,500 in July 2009. The figures were released today by the Treasury Department in its monthly report on the Making Home Affordable Program.
Slowdown attributed to new documentaion rules
At its peak one year ago, the program was starting nearly 150,000 homeowners a month on trial loan modifications, with comparable numbers being approved for permanent modifications as recently as last May. The administration attributes the slowdown in large part to new requirements that borrowers provide upfront documentation of their eligibility for the program, which went into effect June 1.
Meanwhile, the number of homeowners receiving private loan modifications directly through their lenders continued to rise, with 123,000 borrowers approved for proprietary modifications in July, up from 112,000 in May.
Many of those who are currently obtaining private loan modifications are borrowers who began trial loan modifications under Making Home Affordable, but were denied permanent status. The private loan modifications may not offer terms as attractive as those mandated under Making Home Affordable, but lenders have greater flexibility in granting approvals, since they set the terms.
"Redefined the modification standard"
“This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry – both of which are delivering real benefits to struggling homeowners in communities across the country," said Herb Allision, Treasury Assistant Secretary for Financial Stability. "Currently servicers are working through their pending modifications, and while Making Home Affordable works for a number of homeowners, many others are offered other means of avoiding foreclosure.”
Over 1.3 million homeowners have begun trial modifications under the government anti-foreclosure program since it was launched in April 2009, with 435,000 eventually approved for permanent modifications. Another 617,000 trial loan modifications were cancelled, leaving 256,000 homeowners in active trial modifications.
Meanwhile, the Treasury Department reports that 1.5 million proprietary loan modifications have been performed during the same period in collaboration with the Hope Now Alliance, a collaborative venture of industry, government and housing counselors.
Twice as many helped as foreclosed
It’s not clear how many of those were initially participating in the Making Home Affordable Program, but the Treasury Department notes that the number of homeowners receiving assistance, including 473,000 FHA loss mitigation interventions, is more than double the 1.24 million foreclosure completions during the same period.
In addition, Treasury reports that another 7.1 million homeowners have refinanced their mortgages since April 2009 to new loans at lower interest rates.
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