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Fed’s plan to modify loans to prevent foreclosure shows progress; but only for 12 percent of those eligible

Dennis Norman
Dennis Norman

Included in the “Making Home Affordable” program from the Obama administration is the “Home Affordable Modification Plan” (HAMP) designed to help 3 to 4 million home owners by modifying their existing loans to help them be more affordable.

Last week, Michael S. Barr, the Assistant Secretary for Financial Institutions, testified before a congressional sub-committee on the status of these programs. In his testimony Mr. Barr said that weakness in the US housing market developed over many years and that during this period “inadequate regulation of lending and securitization practices, including lax underwriting standards, helped cause widespread over-leveraging in the residential mortgage sector that has contributed to millions of borrowers having mortgage payments they are unable to afford.”
Mr. Barr also stated that “more than 6 million families could face foreclosure over the next three years.”
When addressing the progress of the loan modification programs Mr. Barr said the progress in implementing these programs to date “has been substantial, but we recognize that much more has to be done to help homeowners.”
When reviewing the information included in the report (see chart below) here is what I come up with in regard to the loan modification program results:
  • There are 2.965 million borrowers 60+ days delinquent on their mortgages that are eligible for the modification program
  • Of the borrowers eligible, only 571,354 (19 percent) have had a mortgage modification offer extended to them
  • 360,165 borrowers have received a loan modification (12 percent of the borrowers that are eligible)

While it is good that over 300,000 people have been helped by this program the fact that over 80 percent of the eligible borrowers have not been helped nor received modification offer is disturbing and sad. Some of the borrowers may not be aware there is potentially help available to them while others may have given up and decided to move on.

In looking at the data from the lenders with the largest numbers of eligible borrowers (over 100,000) you will note there are some real differences between lenders in terms of the modifications that have been completed . This may indicate that some lenders are doing a much better job of reaching out to their borrowers and making them aware of options available to them and helping them work through the modification process.
Here’s a quick look at the large lenders and the percentage of their eligible borrowers that have obtained a loan modification, from best to worst (remember the overall rate for all lenders is 12 percent)
  • JP Morgan Chase Bank 25 percent
  • CitiMortgage 23 percent
  • Wells Fargo Bank 11 percent
  • Bank of America 7 percent
  • Litton Loan servicing 3 percent
Home affordable modification plan
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