The federal government has stepped in to assist struggling homeowners with mixed results.
A year ago, the Obama administration set aside $75 billion for the "Making Home Affordable" loan modification program, or HAMP, to help spur loan modifications and prevent 3 million to 4 million foreclosures. The program provides incentives, most of which flow to investors and borrowers, for loan modifications to occur.
The goal of HAMP loan modification is to get the total housing payment — including principal, interest, tax, and insurance — down to 31 percent of the borrower's gross income, said Tom Goyda, a spokesman for Wells Fargo. Those whose housing payments are already lower than the 31 percent threshold don't qualify, and second homes and investor property are excluded from the program.
In November, the initial rollout of the HAMP program was reviewed in a government report. Critics pointed to the results outlined in the report as evidence of loan servicers' tepid response to HAMP:
-More than 3.1 million borrowers had requested information about HAMP.
-Meanwhile, loan servicers had a little over 697,000 "active trial modifications" under the HAMP.
-The number of permanent loan modifications nationwide made through HAMP was 31,382. Bank of America and its affiliates had a total of 98.
Loan servicers counter that a large share of home-loan modifications they are making have no connection to HAMP. For example, Wells Fargo did about 400,000 trial and completed loan modifications last year — only about 25 percent of the modifications were made through HAMP, company officials said.
Until recently, loan servicers could reject a borrower interested in HAMP without providing an explanation. A rule change that took effect this year requires loan servicers to communicate the reasons for denying HAMP loan modifications.
Consumer advocates, including the Oregon State Public Interest Research Group, are still pushing for more detailed disclosures for rejecting borrowers' applications.
— Michael Rose
