The Washington PostDemocracy Dies in Darkness

The foreclosure crisis is still burning years after the housing crisis ended

All eyes are on roughly 800,000 homeowners who will start transitioning out of the Obama administration's main foreclosure prevention initiative this year: Will they or won't they keep up with their mortgage payments once the mortgage relief lapses?

About 28 percent of the borrowers who qualified for the Home Affordable Modification Program (or HAMP) redefaulted since the government launched its effort in 2009.  They're out of the program, and some of them have no doubt lost their homes.

Here’s a look at the redefault rates by region compiled by the special inspector general for the Troubled Asset Relief Program:

Officials at the Treasury Department, which runs the program, said the redefault rates drop sharply for borrowers who stayed current on their loans for at least a year.  They said the administration is feeling optimistic that the ones who continue to pay their mortgages are on more solid financial footing and will be able to keep up with their payments.  But the special inspector general's analysis raised a red flag, pointing out that roughly 97,300 borrowers (or 11 percent of the active modifications) were at risk of defaulting as of November because they had missed one to two monthly mortgage payments.

Now, back to the 800,000 borrowers.  The government slashed their interest payments, sometimes to levels as low as 2 percent, for five years.  Starting this year, they will see their rates gradually climb. The rates will go up by 1 percentage point each year until the borrowers hit whatever the average rate was for a 30-year, fixed-rate mortgage at the time their modification was approved.

After all the increases take effect, the median monthly payment would rise by about $200 at the national level. But many borrowers face steeper increases.

In California and Hawaii, which have a high concentration of HAMP modifications, the median increases will be $300 and $356, respectively. In California, payments will jump by as much as $1,724 in some cases.

Some housing advocates fear that wages and home prices have not improved enough for some of these borrowers, who won't be able to afford the increases. Of most interest to those tracking the issue are the loans that are due to readjust this year and next. Those loans belong to the folks who were hit earlier in the foreclosure crisis, the ones who were probably subprime borrowers concentrated in weaker markets with higher unemployment rates, said Dan Immergluck,  a housing policy professor at Georgia Tech.

Here, again from the special inspector general’s report, are the number of HAMP mortgages that are scheduled to reset in each of the coming years.

2014: 30,126
2015: 256,537
2016: 187,602
2017: 125,410
2018: 105,374


With clock ticking on mortgage relief, homeowners wonder what's ahead