Loan Modifications Picking Up Under Making Home Affordable

More than 150,000 homeowners have been offered mortgage loan modifications through the government's Making Home Affordable Plan in the program's first three months, according to the U.S. Department of Treasury.

More than 30,000 others have obtained government-sponsored mortgage refinancings under the program, which the Obama administration unveiled in March. The numbers suggest that the program may finally be gaining traction after widespread complaints by homeowners about delays during the program's early weeks.

The totals are still a far cry from the up to 7-9 million homeowners the Obama Administration says the two programs are designed to reach, but the pace of the numbers appear to be increasing. As of one month ago, the administration said 55,000 loan modification offers had been extended; no information on completed government refinancings was provided at that time.

Foreclosures down, but role of loan modifications unclear

It's too soon to say whether the two programs are having any effect on stemming the flood of foreclosures that have followed the collapse of the subprime mortgage market last fall and the subsequent decline of the economy. Foreclosure tracking company RealtyTrac did report today that U.S. foreclosure actions declined 6 percent in May, though the 321,000 total was still the third-highest on record.

It was the third straight month that the total number of U.S. properties with foreclosure filings exceeded 300,000 - a first in the history of the RealtyTrac survey, according to CEO James Saccacio. Foreclosure actions in the survey include notices of default, bank repossessions and scheduled auctions, so a single property will likely show up in the survey for more than one month during the foreclosure process.

Approximately one U.S. home in 400 was the subject of some kind of foreclosure action in May, according to the survey.

Refinance, modification plan dogged with frustrations

Details of the Making Home Affordable Plan were announced with great fanfare in early March as the administration's primary tool to help financially stressed homeowners avoid foreclosure. The plan immediately generated great interest, but also widespread complaints about delays during its early weeks as lenders and servicers studied the plan and decided whether and how to participate.

Meanwhile, frustrated consumers complained of being stonewalled as their applications for refinancing or loan modifications were kept on hold. By some reports, practically no modifications or refinancings were completed during the first month of the program.

The Treasury Department reports that 15 lenders are now signed up to participate in the program and the new numbers make it appear the programs are beginning to move forward. Even so, borrowers continue to report frustration and delays in getting their applications approved by lenders, with many reporting difficulty getting straight answers about the program from their lenders or being rejected for assistance until they start missing mortgage payments, despite guidelines that state that is not needed for the program.

Better success rate than Hope for Homeowners

Even so, the two programs are having more success than the Help for Homeowners mortgage refinancing program initiated by the Bush Administration last fall. That program was roundly criticized for completing only one homeowner refinance in its first six months; Congress recently amended the program in an attempt to make it more appealing to lenders.

The Making Home Affordable Plan has two components, a mortgage refinance option for homeowners who are current on their mortgages and owe no more than 105 percent of their home's current value; and a loan modification options for homeowners who may have fallen behind on their mortgage payments or are otherwise in financial difficulty.

The refinancing option is only available to borrowers whose mortgages are guaranteed by Fannie Mae or Freddie Mac; the mortgage modification option is available to all borrowers. The borrower's lender or servicer must be participating in the program in order to be eligible.

For more information, see the Making Home Affordable web site.