Mortgage News
Loan Modifications

Government's Modification Program Under Remodel

(Oct. 15, 2009) The Obama Administration is hoping that re-vamped guidelines will allow lenders and loan servicers to modify up to 25,000-30,000 mortgages a week though even at this pace it may not be fast enough to keep up with the oncoming wave of foreclosures. Sadly less than half of the anticipated foreclosures could be prevented under the current program which has fallen short of achieving its goal of helping 3 to 4 million borrowers save their homes. The $50 billion Making Home Affordable program, enacted earlier in the year, may not be able to address the rising tide of foreclosures stemming from borrowers who have now lost their jobs along with many who are drowning in negative equity. Foreclosures have now bled into the solidly “A paper” or prime market of borrowers who have both excellent credit and had made a sizable down payment of 10% to 20%. The government plan was not designed for, nor may it have anticipated, the need to confront delinquent borrowers in this new category. However rather than scrapping the entire program, the government is hoping to improve and build upon what was already started. An environment of accelerating unemployment coupled with declining equity could make matters far worse, translating into an increasing rate of foreclosures and propelling the market into a down-ward spiral, impacting local communities and the broader economy.

The government, through the Treasury Department's Office of Homeownership Protection, plans to roll out a new streamlined loan modification process. Under the updated program only several documents will be required for signature by a prospective loan modification borrower. Thus far approximately 16% of eligible borrowers have enrolled in the Making Home Affordable program and of those only 770,000, or about quarter, received modification offers. Those who have been processed and approved under the program are primarily in the initial 3 month trial modification phase at the end of which their current trial plan could be extended for a 5 year period. Borrowers who are currently participating in the 3 month trial period will be permitted several additional months to join in the new program. The hope is that with the new program's enhanced speed and efficiency, the government will be able to capture a wider net of distressed borrowers and succeed in processing more modifications quickly.

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.