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Obama Plan for Modifying Mortgages Has Slow Start

According to a recent NY Times article, about 55,000 homeowners have been extended loan modification offers after two months of the Obama loan modification program going into effect.  This is not an encouraging number. Under the Obama plan, the goal is to lower monthly payments to 31 percent of the borrower’s gross income. This will occur first by reducing interest rates to as low as 2 percent.  If the interest rate reduction is not sufficient to hit the 31 percent level, extending the loan term or deferring principal will be another option.

At Loan Mitigation Advocates, we have direct interaction with numerous lenders and we can concur that the U.S. plan for modifying mortgages has started very slowly.  One reason we see as the cause of the slow start is that many lenders are still in the process of revamping their computer systems and altering their process in order to accommodate the new rules and regulations.  Prior to the new regulations, lenders already had a significant backlog of files needing to be processed.  The new rules have just compounded the issue.

Another cause to the processing delays is that some lenders do not have their different departments effectively broken out. We have interacted with lenders who in some cases have their foreclosure, short sale and loan modification departments flowing to the same location.

However, the NY Times article discusses that experts feel a larger issue is the continuing deterioration of the economy. The longer it takes to get the program in gear, they say, the fewer people may qualify for modifications. The expected rise in unemployment and the ending moratorium on foreclosures may directly keep a number of homeowners out of the program.

On a positive note, the article does mention that the administration remains confident that the program will end up offering help to as many as three million to four million homeowners.  And the rate of modifications is expected to increase in the coming months. The mortgage modifications have come in various forms so far, but some have not reduced monthly payments and most have not reduced the balance owed – essential for people who owe more than their homes are worth. Still, according to the article, the number of loan modifications with lower payments has increased in recent months, an encouraging sign.

We concur with the times article and it has also been our experience that many homeowners don’t even know they are eligible for a modification and many others begin the process but unsuccessfully navigate through the various rules established by each lender. At Loan Mitigation Advocates, we do not accept advanced fees and our process enables us to analyze the borrower’s probability of obtaining a loan modification prior to submitting their file to a lender.  Please contact us directly if you feel we might be of service to you.

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