Millions of U.S. homeowners have fallen at least two months behind on their mortgage payments, but fewer than one-quarter of them qualify for assistance under the government's main anti-foreclosure program, according to Treasury Department figures.

The federal Home Affordable Modification Program (HAMP) is designed to help homeowners in financial difficulty hold onto their homes by modifying their mortgages to more affordable terms, usually by lowering interest rates or stretching out payment schedules. However, the Treasury Department's most recent report on the program estimates that of 4.6 million homeowners currently believed to be at least 60 days past due on their mortgages, only 1.05 million would qualify for assistance.

Guidelines exclude many

A look at the program's guidelines shows why most delinquent homeowner's don't qualify for the program. Many are designed to ensure the program reaches only those who really need assistance or will benefit from the type of help the program offers.

For example, of the 4.6 million homeowners believed to be seriously delinquent on their mortgages, it's estimated that fully half a million of them have lenders that don't even participate in HAMP - excluding them right off the bat. Another 700,000 are excluded because for being FHA or VA mortgages, which have their own modification program for distressed borrowers.

Another 700,000 borrowers are believed ineligible because their debt to income level is already below 31 percent of their current income, which is the target figure HAMP modifications try to achieve. Another half-million are excluded because the property wasn't purchased to be owner-occupied, while a similar number are ineligible because the property is vacant, no longer owner-occupied or falls under other exclusions. Still others are left out because they are jumbo loans that exceed the maximum loan value allowed under the program or were initiated after the program's Jan. 1, 2009 cutoff.

Many distressed borrowers obtain help elsewhere

Launched with great fanfare in March 2009, HAMP was originally projected to help 3-4 million homeowners avoid foreclosure by restructuring their mortgages. At present, however, only 633,000 homeowners have permanent loan modifications that were arranged under the program, while another 850,000 started the program but were either dropped or quit voluntarily, many for failing to meet qualifying guidelines before the program adopted more stringent practices for evaluating applicants.

To be sure, HAMP is not the only loan modification option available to these borrowers. Treasury estimates that some 2.31 million homeowners, many of them dropouts from HAMP, have obtained private loan modifications through their lenders since April 1, 2009. Known as proprietary modifications, such arrangements give lenders more flexibility than the HAMP guidelines do, although the terms of such modifications may not be as attractive to borrowers.

Another 893,000 homeowners have entered into FHA Loss Mitigation Interventions during that same period. All told, that makes more than 3.8 million borrowers with long-term alterations to their mortgages over the past two years.

In addition, about 137,000 borrowers are currently in HAMP trial modifications seeking to qualify for permanent status, with about 30,000 new applicants accepted into the program each month over the past six months. About 71 percent of those who began trial modifications over the past year have been approved for permanent status.

Published on November 19, 2013