There are no gifts in this housing recovery. Homeowners received the lowest number of permanent modifications since Christmas this last month through the Obama administration’s Making Home Affordable program, and the number of homeowners dropping out of the rescue program is rising.
Nearly half of the number of people entering the program has dropped out since it got its start, making matters worse for the White House administration facing mid-term elections as foreclosures climb almost every month. The $75-billion fund is financed by the Troubled Assets and Relief Program (TARP) and is making little progress in saving homeowners from foreclosure. Just 36,695 received permanent modifications in July bringing the total helped so far under the plan to 434,716.
The figure represents only a small fraction of mortgage holders looking for help to rescue their homes in the foreclosure crisis. Banking analysts attribute the small number to the voluntary nature of the program and rigid qualification standards. There is no requirement for banks or mortgage lenders to take part in the program, and many are choosing to not take part, resulting in higher foreclosures.
However, many of the nation’s largest banks in the program are actually performing more modifications outside of the White House program because of the restrictive nature of the plan. Bank of America, Wells Fargo and Citi Mortgage, major players in the troubled mortgage market are reporting rising levels of modifications for borrowers.
Formal bank foreclosures rose to 269,952 in the second quarter nationally, according to Realty Trac, an increase of 38% from the same period a year ago. However, home sales increased during the first two quarters of the year as a result of bargain priced foreclosures, the federal home buyer tax credit and bank assisted short sales.
The pace of entry into the rescue program has been slowed due to new upfront documentation requirements implemented June 1 st, according to government officials, streamlining the process to help more homeowners convert to permanent modifications. Homeowners who are granted permanent modifications are saving an average of 36% on their mortgages.
“This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry – both of which are delivering real benefits to struggling homeowners in communities across the country,” said Treasury Assistant Secretary for Financial Stability Herb Allison. “Currently servicers are working through their pending modifications, and while Making Home Affordable works for a number of homeowners, many others are offered other means of avoiding foreclosure.”