Bankruptcy

How far loan modification programs have been helpful for homeowners

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It is known to everyone that many homeowners have defaulted on their mortgage loans due to the economic downturn in the recent past (2007-2009). The homeowners had not been able to get loan modification help from their lenders. So, the Government has introduced Home loan modification Program (HAMP) taking help of which the homeowners can avoid foreclosure and get current on their mortgage loans by making affordable monthly payments. The lenders participating in the program are also eligible to get financial incentives if they modify the loans. However, recent reports reveal that there have been only 300,000 permanent modifications till April 2010, which is only a 50% success rate.According to researches, more than 673,000 households are presently in the trial face of the program. During this trail phase, homeowners need to make their mortgage payments consistently. It has been noticed that many homeowners cannot continue making payments for the entire period till the new loan is secured. There have been about 278,000 failed trials, which indicate that, the number of successful and failed trails is more or less the same. So, the administration has asked the loan servicers to verify the income of households in the beginning of the trial instead of verifying it at the end.

According to Mortgage Bankers Association, about 10% homeowners have missed at least one payment during January-March period in 2010. It is a record high as it shows one-month delinquency is up by about 9.1% as compared to the same period a year back. However, more number of homeowners just starting to experience trouble has lessened. Till March 2010, about 3.5% homeowners have missed one month of home loan payment. It is down from 3.8% as compared to the same period a year back. As per industry experts, about 4.3 million homeowners (about 8% US citizens with a mortgage) are presently at risk of losing their home. These mortgage borrowers have either missed 3 mortgage payments or are in foreclosure. So, if loan modification programs fail to help them, then their homes would be foreclosed or short sale would happen. To help these homeowners, the Government has introduced another program, HAFA (Home Affordable Foreclosure Alternatives) program that complements HAMP by providing a viable alternative to the homeowners, who?re eligible for HAMP but is not able to keep their homes. The program has come into effect on April 5, 2010.

However, the homeowners who?re not able to take advantage of HAFA or want to keep their properties may take help of Chapter 13 bankruptcy. However, you need to qualify the Means Test and satisfy the eligibility criteria to file a Chapter 13.

This article was written by Samantha Taylor, who is the Community Mentor of MortgageFit and has been contributing her suggestions to the Community since 2005. Not just that, she has also made notable contributions through the various articles written on different subjects related to the mortgage industry. Few of her popular articles would include names like ‘Mortgage that you can afford’ , ‘ Mobile Home Loan with Bad Credit’ , and ‘ How much mortgage can I borrow”?

Full post as published by Bankruptcy Articles & Blog on June 02, 2010 (boomark / email).