Stephanie Armour
USA Today
Cancellations in the program are growing because of insufficient documentation from borrowers, missed payments, or because borrowers are found to earn too much to qualify, according to Treasury. By Rick Bowmer, AP
WASHINGTON — Nearly half of homeowners who enrolled in the Obama administration’s program to get lower mortgage payments found themselves canceled out by July.
Forty-eight percent of the 1.3 million homeowners who began three-month trial modifications through the Making Home Affordable Program (HAMP) have been canceled out, the Treasury Department said Friday. About 41% had been canceled out as of June.
Treasury says 434,716 homeowners made it through the trial periods through June and have been accepted into the permanent program that lowers mortgage payments for at least five years. That number is an 11% increase from a month earlier.
A total of 616,839 homeowners who enrolled in HAMP for three-month trial periods were told that they did not qualify for longer-term modifications. That is up 18% from the previous month.
The median saving for borrowers in permanent modifications is $513.09 per month, or 36% of the median payment before modification.
The HAMP program lets borrowers who are struggling to make mortgage payments enroll through their mortgage servicer in programs that reduce mortgage payments through lower interest rates, extending the term of the loan, or reductions in principal.
Borrowers generally must go through a three-month trial period before being accepted into the permanent modification program, and most were allowed to begin the trial before providing documentation of income or other verification.
Cancellations are growing because of insufficient documentation from borrowers, missed payments, or because borrowers are found to earn too much to qualify, according to Treasury.
Treasury officials still say the program is helping stem the tide of foreclosures.
“The latest report on HAMP shows the program continued to help responsible homeowners,” says Herb Allison, Assistant Secretary of the Treasury for Financial Stability. “We continue to see more HAMP trial modifications convert to (permanent) modifications.”
Many borrowers have complained that program is a bureaucratic nightmare. They say banks lose their documents and then claim borrowers did not send back the necessary paperwork.
The banking industry says borrowers weren’t sending back their paperwork. They also have accused the Obama administration early on of pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.
Obama officials say they didn’t pressure banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out.
Copyright 2010 The Associated Press. All rights reserved
