Color of Money: Mixed Score on Mortgage Modifications

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“When you look at who needed modifications and who didn’t get them or how difficult it was to get a one, the program is a failure,” Thompson said.
The law center concluded that HAMP would be more successful were it not for “massive servicer noncompliance.”

“The assumption is that there are a lot more homeowners who could be helped and lenders could benefit if they did more modifications,” said Raymond A. Skinner, Maryland’s secretary of housing and community development. “[The Obama administration's] approach has been to encourage lenders to do it voluntarily. Some people here believe lenders are holding back in the hopes the government will put a lot more money in it, essentially bailing them out again.”

Skinner said many mortgage servicers just didn’t want to do modifications. “And if they don’t do it, nothing happens to them,” he said.

Even so, Skinner said that in Maryland, the program has rescued a lot of homeowners from foreclosure. Maryland had the eighth-highest level of HAMP modifications in the nation, according to data through November of last year. Maryland’s success has been in part because of its public awareness programs and a good network of nonprofit housing counseling groups, Skinner said.

The law center suggests that to reach more homeowners, the program should standardize the evaluations used to determine if a mortgage can be modified, ensure that modifications are truly affordable, require more transparency in the process and force servicers to participate.

“Foreclosures are not going to go away,” Thompson said. “We really need to make this work. We are not talking about giving people something for free. But when it makes economic sense for the borrower, lender or investor to modify a loan, we should.”

Nearly 4 million homeowners have lost their homes due to foreclosure, and up to 10 million homes are at high risk for foreclosure over the next several years, according to the law center. HAMP is scheduled to end on Dec. 31.

Williams said she sees a lot of homeowners who are current on their mortgages but are just barely making the payments. They often don’t qualify for a modification because of the terms of the program. And they can’t refinance because they owe more on the house than it’s worth.

“Honestly, we need another two or three years,” Williams said. “I see some light. But I also see a lot of room for improvement in the program. I know we can’t help everybody, but I also know there are a lot of people we can still help.”
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Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Her email address is singletarym@washpost.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.

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