Mortgage Modification Program Dropouts Outpace New Participants

Despite an increase in the number of participants seeking assistance from the federal foreclosure prevention effort, the Home Affordable Modification Program (HAMP), borrowers continue to drop out of the program more rapidly than new participants join.

While more than 30,000 HAMP homeowners lowered their mortgage payments through loan modification last month alone, 58,020 homeowners dropped out of the program in December 2010.

The federal HAMP initiative seeks to assist borrowers in negotiating with lenders to modify their home mortgage to avoid home foreclosure. The initiative is funded by the Troubled Asset Relief Program (TARP).

In recent weeks, the program has experienced heightened scrutiny and criticism for the high number of borrowers who are failing out the modification program, as well as the money spent on the mortgage modification program.

It is expected that House Republicans will attempt to repeal the legislation that provided TARP with $700 billion for mortgage modification efforts. According to Bloomberg, housing advocates, lawmakers and watchdog groups have all heavily criticized the HAMP effort.

The HAMP program, at a minimum, has fallen drastically short of assisting home owners who are underwater on their mortgages. President Obama’s goal was to help 3 to 4 million homeowners modify their mortgages.

While the cause of the lagging support and the limited number of homeowners assisted by the program is unknown, it’s clear that homeowners continue to fail in their efforts to save their homes. In 2010, there were more than 2.9 million foreclosure filings in the U.S.

Source: Bloomberg (Online) “Foreclosure-Prevention Program Shows Gains Amid Criticism”