Mortgage Modifications Increasing Under Obama Plan

The Making Home Affordable Plan is picking up steam, according to HUD Secretary Shaun Donovan, extending trial mortgage loan modifications to 40,000 homeowners in the past week alone.

Addressing the annual conference of the National Association of Real Estate Editors on Thursday, Donovan said trial loan modifications have been offered to 200,000 homeowners to date, including last week's numbers. That would represent a significant picking up the pace for the three-month-old program, which earlier this month was reporting only 120,000 modifications extended.

"Over the next few months, we expect these numbers to grow significantly," he said.

80,000 mortages refinanced

About half of those loan modifications have enabled homeowners to reduce their monthly mortgage payments by one-fifth or more, according to James Lockhart, director of the Federal Housing Finance Agency, who addressed the conference on Wednesday. Lockhard said the program has also enabled another 80,000 homeowners to refinance their homes through Fannie Mae or Freddie Mac.

The program, which is the Obama administration's primary initiative for helping at-risk homeowners avoid foreclosure, has been beset by numerous difficulties since it was unveiled in early March. Many homeowners have complained of stonewalling or evasive responses from their lenders, who are given incentives under the program to modify or refinance mortgage loans, and few lenders had actually signed up to participate in the program until early April.

Delays blamed on demand, complexity

Lenders in general have blamed the delays on high demand and the time needed to understand the intricacies of the program and develop their own guidelines for approving loan modifications and mortgage refinances.

The recent increases could also be due in part to new incentives the administration added last month to protect lenders against further decreases in property values following a loan modification. Recent signs that housing prices are stabilizing may also be making lenders more willing to modify or refinance mortgages, since mortgages are secured by the value of the property involved.

16 lenders signed up to participate

Donovan said 16 mortgage lending and servicing companies are now participating in the program, representing some 80 percent of the mortgage market. The list includes such major lenders as Bank of America/Countrywide, Chase Financial, Wells Fargo Bank, Citigroup and GMAC Mortgage.

The Making Home Affordable Plan still has a long way to go before it will come close to assisting the 7-9 million homeowners the Obama administration has said could be helped through either loan modifications or refinanced mortgages under the plan. However, it has been markedly more successful than the Hope for Homeowners mortgage refinance program enacted by Congress and the Bush Administration last fall, which reportedly approved only a few dozen mortgage refinances in its first six months.

Congress subsequently has modified that program to make it more attractive to lenders, but it is not yet clear what results those changes may be having.