Home Affordable Help Turns 1, Still Crawling
As the federal foreclosure mitigation program hits the one-year mark, it's finally helping a significant number of people renegotiate their mortgage payments and stay in their homes.
More than a quarter million people had been approved for permanent home loan modifications through the $75 billion federal Home Affordable Modification Program as of the end of February, according to the U.S. Treasury and the Department of Housing and Urban Development.
And there's an indirect benefit to a wider group of people who may be worried about the value of their homes: A new wave of home loan foreclosures is the biggest potential threat to the housing market's weak recovery.
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.
Many of them are in the Home Affordable program, which has been written off as a massive failure by much of the housing business. Close to a million homeowners received trial loan modifications in 2009, but at the time, lenders were unable or unwilling to makes these modifications permanent. Economists feared that Home Affordable was simply delaying inevitable foreclosures and stretching out the pain of the correction to housing prices.
"Foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity," said James J. Saccacio, chief executive officer of data firm RealtyTrac. "This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure."
Congress has actually started an investigation into the Home Affordable program's failure to reach its goal, announced in November 2009, to permanently modify 375,000 loans by the end of 2009. Instead, the program had achieved just 66,000 permanent modifications by the end of the year, with another 44,000 approved but not yet finalized.
The quarter-million permanent modifications approved as of February is still short of the goal for last year, but is still a huge increase in volume for the program, which finished last year with just 66,000 permanent modification completed. The quarter million includes more than 170,000 homeowners who received permanent modifications by the end of February and another 91,800 homeowners who have been approved by their mortgage companies for permanent loan modifications -- the homeowners just have to return their signed paperwork.
As of the end of February, more than 1.1 million borrowers have begun trial modifications of their loans through the program. All of these borrowers had missed payments on their home loans. However, by joining the program, they have put the foreclosure process on hold. The median borrower lowered their monthly payment by $500, cutting their payments by more than a third.