Color of Money: Mixed Score on Mortgage Modifications

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  • WASHINGTON — Alfreda Williams has been on the front lines for a long time, shepherding through some tough battles.

    Williams is a senior foreclosure counselor for HomeFree-USA, one of the many agencies across the country approved by the Department of Housing and Urban Development to help people save their homes if possible. Williams has seen the ugly side of the expensive and predatory mortgages that helped create the housing crash we’ve been trying to recover from for the last several years.

    “The hardest thing for me is working with the older clients who have owned their homes for years,” Williams said. “Whoever did their mortgages took advantage of them. And there is no way for many of them to undo what was done to them.”

    In response to the housing crisis and the onslaught of foreclosures, the federal government established the Making Home Affordable Program, which includes several strategies to help financially distressed homeowners. Recently, the National Consumer Law Center took a look at one of the largest of those strategies, the Home Affordable Modification Program, or HAMP, which was launched in 2009.

    Under HAMP, borrowers can apply to have their monthly mortgage payments lowered to make them more affordable over the long term. Lenders and mortgage loan servicers don’t have to participate. But to encourage modifications, participating servicers are provided with financial incentives to modify loans to help homeowners avoid foreclosure.
    Has the program been a success?

    Yes and no, says the law center.

    Before HAMP, nearly half of all loan modifications failed, according to a recent report by the center. Now, more than 80 percent of the modifications negotiated under HAMP are still in place a year after they have been made. The modifications have also significantly lowered re-default and foreclosure rates compared with modifications made outside the program. Almost 850,000 homeowners have HAMP modifications that are working, according to the report.

    “For the people who got modifications, the program was outstandingly successful,” said Diane E. Thompson, an attorney with the law center and one of the co-authors of the report. “Most would not have gotten modification without HAMP and they would not have gotten the deep and sustainable modifications they needed.”

    Although the statistics are good, it’s still not enough when you compare it to the projected number of borrowers the administration thought it could help. HAMP hasn’t come close to reaching the 3 million to 4 million households first estimated.

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