Obama’s foreclosure prevention plan continues to disappoint as more than 122,000 trial mortgage modifications were canceled in April. The program was projected to provide help for 3 to 4 million homeowners at risk of foreclosure by placing them temporarily in trial modifications to assess if they were qualified for permanent assistance.
Administration officials state that the number of canceled trial modifications spiked last month likely because borrowers were allowed to enroll in the trial program by self-reporting their income, but were later dropped from the trial program once they couldn’t provide evidence of actual income. About 637,353 homeowners remain in the trial modification program, which determined if homeowners can keep up with lowered payments and to give lenders time to assess their eligibility for permanent modifications.
Only about 68,000 homeowners were converted to permanent modifications last month, while the total number of troubled homeowners who were dropped from the foreclosure rescue plan has reached 277,640 since the program began a year ago. A total 295,347 people have received permanent, long-term loan modifications, although another 3,744 of those people were later cut from the permanent loan modification program.
Big changes to Obama’s program are on the way thanks to criticism that the administration isn’t doing more to help troubled homeowners. Starting June 1st, homeowners will have to provide all income verification documents before being considered for a trial modification, which will weed out those not eligible for permanent assistance. On July 1st, a new program provides more assistance to unemployed homeowners, including the possibility of suspending monthly payments entirely or reducing to less than 31% of pre-tax household income.
The administration is also more closely monitoring and tracking mortgage servicers to put more pressure on servicers to work through trial modifications more efficiently. Another initiative later this year will encourage mortgage servicers to lower loan balances for delinquent borrowers in certain circumstances. One more initiative will provide principal reduction for eligible borrowers who owe more than 115% of the home’s current value; the balance will be forgiven if the homeowner makes on-time payments for 3 years.
With these changes, continued efforts to help troubled homeowners may steer the housing market back on a faster track to recovery. Read more on the story at CNN Money.
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