Mortgage Modifications Improve

Mortgage modifications have resulted in more than one million mortgage borrowers receiving a median savings of $500 a month, according to the Treasury Department. The improvement represents a 36% savings in mortgage costs to home borrowers.

Loan Modifications

The temporary modifications are part of the government’s Home Affordable Modification Program (HAMP), which has been troubled by a series of stumbling blocks. Permanent modifications have been granted to just 170,000 homeowners with 91,800 others that have been approved by servicers for permanent modifications.

The February report shows an improvement in permanent modifications with an increase of 54,000 modifications over the previous month. Trial modifications are made for a minimum period of three months, after which a permanent modification may be granted provided that the mortgage holder makes timely payments.

The Obama administration’s program has targeted more than 4-million homeowners who are eligible for the program. The plan had become a political obstacle for Democrats in an election year facing stiff opposition in a series of Congressional races, but is showing an improvement with bankers that seem more willing to work with homeowners under pressure from the White House.

Foreclosures are forecast to top 3-million homeowners in 2010. But the modification program is undergoing a major escalation to keep homeowners at risk of foreclosure in their homes.

Bank servicing companies are paid $1,000 for each modification they are able to make permanent under the program, and bankers are provided part of the loss from government TARP funds for mortgages on which they take a loss. Exact details of how much bankers are being incentivized to make the modifications are unclear.

A series of problems have delayed the program, which has been in the process for slightly more than one year. The Treasury Department says roughly 75% of homeowners in trial modifications are able to keep current on payments for the initial three month period.

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