Mortgage Modification Program: Problematic

Posted on May 18, 2011 at 4:44pm by

Lost paperwork, lack of communication and wrongful rejections are just a few of the problems Missouri homeowners have reported.

Launched in March 2009, the Home Affordable Modification Program was the Treasury Department’s keystone attempt to curb the nation’s rising number of foreclosures. The program gives homeowners the chance to reduce their mortgage payments if they meet certain eligibility requirements.

If accepted, they pay a lower rate during a three-month trial period. And if they make their payments, the modification is supposed to become permanent, and they no longer have to pay the old, higher rate.

That end result – a permanently reduced monthly payment – has proven elusive for most homeowners who’ve signed up.

The program was created to make loan modifications easier by tackling a central barrier in the modification process. The banks and mortgage companies that receive mortgage payments – known as mortgage servicers – have little incentive to help homeowners prevent foreclosure because they don’t own most of the loans they handle. So if a home is foreclosed on, they often don’t lose money.

To induce servicers to participate in the program, the Treasury gives one-time payments of $1,000 for a completed modification and up to an additional $1,000 per year for three years if a borrower makes timely payments.

But the Treasury hasnbt been able to force servicers to follow program guidelines. By its own admission, it has no way of holding them accountable because the program is voluntary and there is no penalty when servicers fail to help qualified homeowners.

As a result, most program enrollees haven’t received permanent modifications at the end of a trial. Instead, their rates return to original amounts, and they now owe back payments. This means if someone’s original monthly payment of $1,000 is reduced to $700 during a trial, they now owe $900 because of the $300 less they’ve paid each month b and their rate returns to $1,000.

Neil Sader and The Sader Law Firm have more than 30 years of combined experience in Chapter 7 bankruptcy and Chapter 13 bankruptcy cases and can help provide Kansas and Missouri homeowners with real financial freedom. Contact Neil Sader today for a free consultation at (816) 561 1818 to learn more about the options available to you.

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