U.S. foreclosure assistance increasing, but slowly
Saturday, January 16, 2010
The Obama administration's foreclosure prevention program reached about 850,000 homeowners through December, including more than 50,000 in the Washington region, according to Treasury Department data released Friday, but the effort continues to struggle to make a significant impact.
About 1,500 District residents have had mortgage payments lowered under the program, called Making Home Affordable. In Virginia, about 22,000 homeowners have been helped, compared with 28,000 in Maryland. The numbers represent an overall increase in modifications of about 17 percent from the previous month, according to Treasury data.
But only a small portion of borrowers in the program have moved from its trial phase into a permanent loan modification. Overall, roughly 66,000 homeowners, or about 7 percent of the 850,000 enrolled, have received permanent modifications, according to the Treasury data. That includes about 4,200 borrowers in the Washington region.
Many homeowners in the trial phase have not submitted enough documentation to prove they qualify and are at risk of losing mortgage help, government and industry officials have said. But in some cases, housing advocates say, borrowers have submitted the required paperwork but remain in limbo, waiting for their lender to act.
With pressure increasing in recent weeks to speed borrowers through the process, including threats to withhold incentive payments to financial institutions, the industry is showing signs of improvement, Treasury officials said. The number of borrowers in permanent modifications doubled between November and December, although they comprise just a small portion of distressed homeowners. More modifications are on track to be completed soon, according to the Treasury data.
"Some of the banks are just doing a better job," Michael S. Barr, a Treasury assistant secretary, said in a conference call with reporters. "You have some banks that really did step up to the plate quickly . . . and others whose results were disappointing and who need to do much better."
The program helps borrowers get payments lowered to 31 percent of their income for an average savings of $500 a month. The administration has said the $75 billion effort could aid as many as 4 million homeowners.
Of those helped so far, 52 percent said they needed assistance because they experienced a loss of income, while 11 percent said they had too much debt or expenses in addition to their mortgage, according to the Treasury data. Another 6 percent were unemployed.
"We believe there is much, much more work to be done to make sure the program is running right," Barr said. "We are encouraged by the efforts we have seen to date."
But already nearly 50,000 homeowners who entered the program have been dropped because they either did not qualify, submit required documentation in time or make all of their payments. And about quarter of the homeowners in the program have not made all of their payments, while some have not made any payments at all.
The Obama administration is facing growing pressure to alter the program to accommodate more homeowners or force lenders to modify mortgages more quickly.
"Serious people inside and outside the administration have thought this through, and we all understand that a more substantial response is needed," said John Taylor, chief executive of the National Community Reinvestment Coalition, a housing advocacy group.