While the government has promised help to 9 million mortgage borrowers, just over 31,000 homeowners have received a permanent loan modification under the Obama administration’s mortgage relief plan. This is a big jump from the ~1,700 noted in September but still a big setback for the government’s embattled effort to stem the foreclosure crisis.
Lenders say they are having a hard time getting borrowers through the trial period, which can last up to five months. Many homeowners who were given verbal approval for the program have not returned the necessary documents. This results in a quick default and the foreclosure process is back on.
Bank of America Corp., for example, had only completed 98 modifications at the end of November, far fewer than several smaller rivals. GMAC Mortgage completed 7,100, the most of any lender in the program, which was launched in March.
They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a financial hardship letter. Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years.
But a watchdog report this week said the government effort “appears capable of preventing only a fraction of foreclosures”.
Thanks to the AP’s Alan Zibel for the info.
- The Bank Slayer
