By Mary Ellen Podmolik | The Obama administration reported Monday that its efforts to keep
delinquent borrowers in their homes had met with mixed results, and that
these numbers are likely to get worse before they get better.
The administration said permanent modifications of delinquent mortgages
rose to almost 300,000 nationally in April, a 13 percent improvement
over March. But new data from the Treasury Department showed that as of
last month, almost one of every four homeowners who received a trial
loan modification fell out of the program.
The monthly accounting of the government’s Home Affordable Modification Program showed that of the 1.2 million trial modifications started since the program’s start, 277,640 of them have been canceled.
In the Chicago area, 14,890 homeowners received permanent loan modifications since the program’s inception, a 31 percent increase over March’s total. However, the number of active trial modifications continued to drop, falling 19 percent from March, to 32,178. In February, 43,215 local homeowners were participating in trial loan modifications.
Some of the drop was expected. “One of the major reasons for that is last year, we allowed stated income to be the basis for a trial modification,” said Treasury Assistant Secretary Herb Allison in a conference call with reporters. “What we’ve seen is in a significant number of cases, servicers are not able to match the written evidence of income to the stated income.”
As of June 1, the program mandated that servicers require income verification up front to qualify for a trial modification, rather than stated income. Many servicers put that rule into effect already. That means going forward, more trial modifications with documented income are likely to be converted to permanent modifications, while the number of cancellations also is likely to increase, officials said.
The report specified the wide disparity in loan servicers’ efforts to make trial modifications permanent and give homeowners a final decision on their modification application in a timely fashion.
For example, the report noted that more than 70 percent of trial modifications initiated by JP Morgan Chase and Saxon Mortgage Services Inc. were at least six months old. The program aims for a three-month turnaround time.
“Homeowners are waiting, and we want them to get answers,” Allison said.
Servicers, officials said, have made a commitment to the Treasury Department to finish working through their oldest backlog of modification applications by the end of June.
