The number of homeowners receiving permanent loan modifications under the government's Making Home Affordable Program continued to shrink in August, even as the number of new admissions to the program ticked upward for the first time in nearly a year.

According to the government's monthly Housing Scorecard and Making Home Affordable (MHA) program report, 33,342 homeowners were approved for permanent loan modifications in August, down from 36,695 the month before.

At the same time, the number of new admissions to the program increased, although slightly, for the first time in nearly a year. A total of 26,628 homeowners were approved to begin trial loan modifications, the first step in the process, up from 24,577 in July.

Those flagging numbers have many critics saying the that MHA, the government's primary anti-foreclosure program, is a failure. Nearly four times as many homeowners were approved for proprietary loan modifications through their lenders in August as obtained permanent loan modifications through MHA. More than 120,000 homeowners obtained private loan modifications in August, a pace that has held steady in recent months.

Low numbers attributed to new documentation rules

The government has attributed the slow pace of new admissions to the program in recent months to more stringent documentation requirements that require proof of income and finances before a trial modification can begin. However, new trial modifications have been steadily declining all year after surging by more than 100,000 a month throughout the second half of 2009, following the program's launch that spring.

More than 435,000 homeowners are presently in permanent loan modifications under the program, out of 1.3 million trial modifications started since the program began. More than 680,000 loan modifications have been cancelled, leaving just over 200,000 homeowners in active trial modifications.

Of those whose modifications were cancelled, half were later approved for a proprietary loan modifications, according the government's monthly Housing Scorecard, released along with the MHA report.

Treasury: Twice as many loan mods as foreclosures

Supporters of the MHA program say that even though it has fallen short of its original goals, it has helped slow the pace of foreclosures and prompted lenders to offer more favorable terms on proprietary loan modifications. The Treasury Department, which operates the MHA program, notes that the number of homeowners obtaining loan modifications of all types since the program began in April 2009 is more than twice the number of completed foreclosures during the same period.

That figure includes the 435,000 permanent modifications, 250,000 trial modifications pending, 510,000 FHA loss mitigation and early delinquency interventions under a separate program, and nearly 1.6 million proprietary loan modifications, compared to 1.24 million foreclosures completed during the same period.

Published on September 23, 2010