Fewer homeowners are being approved for the government's mortgage loan modification program these days, but those who are are doing much better than those who entered the program during its early phase.

Figures released today show that 80 percent of homeowners who obtained mortgage loan modifications under the government's Home Affordable Modification Program (HAMP) since June 2010 have had their modifications made permanent. That compares to only 42 percent who were approved for permanent loan modifications among those who entered the program during its first year.

Ten percent of the recent admissions to the program are still in trial loan modifications, awaiting a decision on whether they will be approved for permanent status, with another 10 percent having been denied or dropped out of the program. That compares to a denial/drop-out rate of approximately 57 percent among those who entered the program prior to June 2010.

Tighter prequalification rules for home loan modifications

The change is largely due to more stringent pre-qualification guidelines put in place after the program's first year. In the early days of HAMP, private mortgage servicers were approving as many as 160,000 borrowers a month for three-month trial modifications under the program. However, confusion over program guidelines resulted in many of those trials modifications dragging out for six months or longer, before it was eventually determined that many of them did not qualify for the program in the first place.

The government subsequently began to require greater documentation of eligibility before private mortgage servicers could approve borrowers for trial modifications, and the number of new trials fell sharply. These days, only about 30,000-40,000 new trials are begun each month, but with a greatly higher success rate in transitioning three-month trials into permanent loan modifications.

Fewer homeowners helped than expected

The HAMP program has struggled since it was launched with great fanfare by the Obama administration in the spring of 2009. Originally projected to help 3-4 million homeowners avoid foreclosure by modifying their mortgages to more affordable terms, it has fallen far short of that goal.

With the program due to expire at the end of 2012, only 720,000 homeowners are currently in permanent mortgage loan modifications arranged under the program. Some 1.7 million have begun three-month trial modifications, but most of those were either turned down for permanent status or have otherwise left the program. Some 91,000 trial modifications are currently underway.

More information on HAMP, including application and eligibility guidelines, is available on the federal Making Home Affordable web site at www.makinghomeaffordable.gov/pages/default.aspx, along with information on other home-retention mortgage programs as well.

Published on December 2, 2007