Foreclosure Prevention Gains Traction

Federal ReserveThe biggest federal program to fight home loan foreclosures is finally making some progress.

More than 116,000 homeowners had received permanent loan modifications through the federal Home Affordable Modification Program as of the end of January, according to the U.S. Department of the Treasury and the Department of Housing and Urban Development.

Another 76,000 homeowners have been approved for permanent modifications - officials are now waiting for them to return their signed documents. That's a total of 192,000 homeowners approved for permanent modifications - a big jump for the program, which struggled for most of 2009 to achieve any significant number of permanent loan modifications.

The stakes couldn't be higher. Foreclosures are the anvil holding down the housing market and its wobbly recovery.In December, just 66,000 homeowners had received permanent modifications and another 44,000 had been approved. The new data suggests that almost all 44,000 of those approved homeowners finalized their loan modifications. Also, the program has continued to speed up in January, even though December's report was already a huge improvement for the Home Affordable program, which struggled for most of 2009 to achieve any significant number of permanent loan modifications.

There are now 1.8 million homes on the road to foreclosure, according to a recent report from credit agency Standard & Poor's. In most cases, that means the homeowners are extremely late in their payments. Court delays, temporary loan modifications and foreclosure moratoriums are the only things that have kept these homes from being seized and auctioned.

If this 'shadow inventory' of homes on the brink turn into real foreclosures, the flood of emptied homes would overwhelm the housing market... again.

More than half of that shadow inventory is now in the Home Affordable Modification Program. Currently 940,000 homeowners now have trial loan modifications through the program. However, over the last year, many commentators became skeptical that those homeowners will avoid foreclosure, as months past but only a tiny number of homeowners received permanent modifications.

It's still not clear that Home Affordable is acting quickly enough. To keep a new foreclosure wave from striking, Home Affordable will probably need to work even faster. But for now, federal officials sound confident:

"With nearly one million homeowners paying less each month and the number of permanent modifications steadily rising, HAMP is doing the job it was designed to do," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office. The program is on pace to meet its overall program goal of providing 3-4 million homeowners the opportunity to stay in their homes, according to federal officials.

Photo: The U.S. Treasury building in Washington, D.C.
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