The new Obama administration has committed $50billion of Federal tax dollars towards the Home Affordable Modification Program (HAMP). As of December of 2009′, over 650,000 homeowners nationwide have applied for and been placed in trail modifications. And of these 650,000 applicants, only 2,000 homeowners have been granted permanent Loan Modifications. That is a success rate of less than 1% !
In December, the Obama Administration issued a warning to the major banks to increase the rate of processing and approvals of loan modifications. But some recent studies have shown that high rate of denied loan modifications may not be the solely the fault of the major banks. There were three basic reasons found. One, many homeowners are unable to make the payments offered during the 3 month trial period, for high unemployment continues to erode the economy. Two, some homeowners realize that even with a loan modification, they are still going to owe much more than their home is worth. In Orange County, reports have shown that 1 in 5 homeowners are upside down on their mortgage loan. When offered the 3 month trial loan modification, many borrowers still decide that the home is still too much of a financial burden on their family. The 3rd reason was that many Banks have reported that in some areas of the country, the have received less than 25% of the required paperwork from borrowers in order to make a financial loan modification analysis.
Hopefully, the pressure being placed on the major banks will help to improve the acceptance rate of HAMP loan modifications. Probably in an effort to hedge its bet though, the federal government has recently rolled out its new and improved HAFA program, late last year. This HAFA program was created to provide incentives to banks to accept short sales or a deed-in-lieu of foreclosure. A homeowner must be declined for a HAMP loan modification, before they can be considered in the HAFA program short sale or deed-in-lieu. For Orange County homeowners desiring more information, click on one of the links regarding Loan Modification or Short Sales.
