Government program continues to carry forward trial and permanent home loan modifications

01/22/2010
Government officials are trying to help keep people in their homes in light of the record number of U.S. foreclosures.

A joint release from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Treasury shows that more than 1.16 million trial-period loan modification plans have been extended to homeowners through the government''s Home Affordable Modification Program (HAMP). The goal of HAMP is to help between 3 million and 4 million homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term.

HAMP gives lenders and homeowners the chance to get together and modify a home loan, which can lower payments and make it possible for consumers to keep their homes rather than lose them to foreclosure. After a few months in a successful trial plan, homeowners are supposed to be offered a permanent modification to their home loan.

The data from the government shows that there were 787,231 active trial loan modifications as of December, 2009. However, only 66,465 permanent modifications have been completed through the program, with another 46,056 are awaiting the approval of homeowners. In all, only 112,521 permanent modifications have been approved by lenders through HAMP.

Though the program has helped some people, it has been the subject of much criticism from its start last year. Government regulators expressed concern that lenders weren''t showing enough effort to extend trial loan modifications to homeowners. Meanwhile, lenders claimed the government itself hadn’t been prepared for the flood of paperwork challenges, while homeowners also found it difficult to get the needed documentation together in order to engage the program.

Last summer, government officials and lenders got together in order to iron out differences on the program. At that time, lenders promised to get 500,000 trial mortgages offered by the fall of 2009, a goal they reached two weeks early. Furthermore, the government consolidated the paperwork homeowners need in order to take part in the program and made the documents available online at www.hud.gov.

"HUD will continue to work with our administration partners and utilize our broad network of housing counseling agencies to increase the number of borrowers receiving sustainable and affordable modifications under HAMP," said William Apgar, senior advisor for mortgage finance for HUD, upon the release of the December statistics.