Thursday, September 10, 2009

Meager modifications portend prolonged housing crisis -- again

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Only 12 percent of mortgages qualified for modifications under the Obama Administration's Home Affordable Modification Program, or HAMP, have been modified. Even if all 3 million were modified, the housing crisis would continue.

by Broderick Perkins
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Deadline Newsroom - Nationwide, the share of mortgages actually modified remains dismal, compared to the number of mortgages eligible for fixing under the federal mortgage modification program.

Worse news -- even if lenders get off their assets and significantly improve the number of mortgage modifications, it probably won't stop the housing crisis until it has run its course.

The U.S. Treasury Department's "Making Home Affordable Program Servicer Performance Report" for the period ending in August, said only 12 percent of mortgages qualified for modifications under the Obama Administration's Home Affordable Modification Program, or HAMP, have been modified.

Source: Making Home Affordable Program Servicer Performance Report through August 2009

That's little better than the 9 percent during the first such performance report for the period ending in July.

HAMP launched in March. An estimated 3 million mortgages are eligible for modification, but by August only about 360,000 had been modified.

Lenders appear to be rationing mortgage modifications and the small number of loan workouts that do get through are being swallowed by a foreclosure pandemic. Several lenders with 30,000 or more eligible mortgages have not changed one loan and large banks that received billions in federal bailout money lag behind government expectations.

The Treasury hopes to see 500,000 trial modifications by November 1. A trial modification becomes permanent once a borrower makes three reduced monthly payments.

However, yesterday, written testimony for a U.S. House of Representatives subcommittee on housing and community, Michael S. Barr, the Treasury's Assistant Secretary for Financial Institutions suggested even if all eligible mortgage are modified "we should still expect millions of foreclosures."

Some analysts say more than six million Americans are at risk of foreclosure in the next three years.

The Center For Responsible Lending warns, unless there's serious intervention, foreclosures are on track to soar to 13 million during the next five years.

The outlook is grim for assistance from so-called federal "cram-down" legislation. If passed into law, it would allow bankruptcy judges to reduce mortgage loan amounts.

Similar legislation went down in defeat last year.

Read about the first performance report and get more information on the mortgage modification morass at "Meager mortgage modifications overshadowed by mounting foreclosures"

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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