Home Mortgage Modification Program

What are the issues with the Home Mortgage Modification Program?

President Obama signed into law on March 4, 2009 the Home Mortgage Loan Modification Program. It has been in the news as President Obama has held several high profile meetings with the CEO’s of the largest lenders. And yet it continues to lag behind in the expectations of bringing help to cash strapped home owners. An early article trying to simplify the law can be found at: http://www.cnbc.com/id/29510983/New_Mortgage_Plan_Who_Qualifies_and_How_It_Works

The US Treasury Dept created guidelines on March 4, 2009 for the program. http://www.ustreas.gov/press/releases/reports/modification_program_guidelines.pdf In this document it spells out the intent of the law. In particular who is eligible, how it is to be administer and how much relief is to be given to homeowners. Pay particular attention to pages 7 to 9 of the document; second liens are covered on page 15.

So how has it gone so far? In one word TERRIBLE! Only 170,000 of the 1.1 million applicants have succeeded in being accepted into the program. There are roughly 8 million home owners expected to be at risk of foreclosure in the next 2 years. The major problem lies in the red tape and hurdles homeowners must go through to apply with the mortgage companies. In addition as the real estate market has collapsed in many areas due to foreclosures and short sales, the law has not stemmed the tide. As written in the following article: http://www.msnbc.msn.com/id/36039170/ns/business-eye_on_the_economy/page/2/ 

Second Liens are a major problem for many homeowners. The first mortgage typically is not underwater in terms of debt to FMV of the home; however, adding in the second mortgage (junior debt) has many homeowners at risk. The main problem is the Treasury Dept has still not addressed the guidelines for this part of the program. Recently BOA announced that they were beginning to forgive some principal debt as part of the program....