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Mixed Results Mark Trial Loan Modification Program

The good news is that the rate of trial loan modifications now exceeds the pace of completed foreclosures occurring on a monthly basis. Prior to a foreclosure proceeding, it is now required that a borrower is properly screened for potential loan modification eligibility.

Over 500,000 borrowers are currently participating in the Home Affordable Modification Program's 90 day trial payment plan under the government's Making Home Affordable Program. However, it is estimated that less than 20% of those participating in the program will ultimately succeed at being able to remain in their home even with a revised mortgage payment.

Approximately half of participants are likely to be ineligible for a permanent modification of their loan because of a failure to meet the income requirements under the program and another 30% are likely to re-default on their payment within 12 months of the modification due to job loss or some other factor.

Program participants are initially qualified over the phone based on their verbal statement of income, however once an attempt is made to officially verify income, it typically falls short of what was claimed over the phone. The program was designed so that homeowners may apply only 31% of their gross monthly income towards their revised mortgage payment. A 60 day extension was added under the trial program to give participating borrowers sufficient time to provide income documentation to complete their trial modification. The program cannot be considered to have allowed for a legitimate trial period unless a participant's income is actually verified.

Nancy Osborne, ERATE.com Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.