Red tape and limited savings are hampering the much-lauded $75-billion mortgage modification plan. A new round of government help may be on the way as foreclosures are expected to reach 3 million in 2010.
Haraz N. Ghanbari/AP
The Obama administration announced Friday that its much-lauded mortgage modification plan has had a disappointing start, helping far fewer Americans stay in their homes than originally hoped.
Intended to bolster struggling homeowners, the Home Affordable Modification Program (HAMP) has permanently helped only 66,000 homeowners out of 4 million that may be eligible.
As foreclosures are expected to rise from 2.8 million in 2009 to 3 million in 2010, analysts expect the Obama administration to modify the modification program to keep it from becoming another major political issue in a year when Democrats are facing a growing anti-spending sentiment among the voting public.
“HAMP is running into issues of too few permanent modifications, and re-default performance is expected to be poor," Barclays Capital said in a recent research note to clients.
Treasury Department officials said Friday that more than 900,000 homeowners have signed up for trial modifications and the program has yielded “measurable success.” The conversion rate from trial to permanent modification, however, is only about 15 percent.
One problem reported by the Treasury Department is that only 75 percent of homeowners are able to stay current on their new payments for a three month trial period. What’s more, the Obama administration and mortgage servicers say homeowners aren’t fully completing the needed documentation proving income and hardship.