Federal Government Comes up with Loan Modification Program
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When will the economy come out of the depths of Recession? That is the question which is topmost on the minds of most Americans. After all, unemployment is at its peak. As people lose jobs, even those with very good credit scores are faltering on mortgage payments. Hence, foreclosures have become common.
The Federal Government has come up with a program – Making Homes Affordable – under which grants are being given to foreclosed neighborhoods. The grants are then being handed over to hassled homeowners. Assistance is being provided in terms of down payment assistance and mortgage payments.
According to a monthly report, around 2,555 homeowners in Colorado had been part of the administration’s $75 billion Home Affordable Modification Program. In comparison, in July, there were 3,329 participants. This means a decline of 23.25 %.
Homeowners have to take part in trials. Then only the mortgages can be reduced permanently. In Colorado, 6,469 people received permanent modification of their loans. This marked a slight improvement from July figure of 6,124. In other words, it meant an increase of 5.6% .
The loan servicers conduct pre-screening of candidates before they can be eligible for loan reduction. More than 50 % of candidates got rejected in the first stage. When the Federal government had come up with the program, the objective was to bring down the loan liability of the homeowners so that they could keep the homes.
Initially, the Federal Government had thought of helping around 4 million homeowners. However, so far, it has been able to permanently modify 468,058 mortgages.
A broker, Ron Woodcock says that HAMP is a failure. The Federal Government has made things worse. He also said that short sales are increasing fast. Short sales happen when owners sell a home at lower prices than what they owe in the market.
Experts observe that unless more jobs are created, the economy will not improve. As of now, people do not have the requisite funds to pay for the home loans.
Either, they do not have jobs, or even if they do, they have suffered pay cuts. An analyst, Mike Rinner said that the permanent loan modification is putting a financial pressure on every tax payer. In fact, it is costing every home owner about $18.48 per annum. Rinner said that the government is pushing many people into a debt trap. HAMP will not heal the economy, in any way.
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