Obama's Housing Program Shows Mixed Results

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The Obama Administration's Home Affordable Modification Program (HAMP) continues to produce mixed results, according to a government report released Monday. While the number of troubled homeowners who forestalled foreclosure with permanent mortgage modifications under the program increased from 299,000 in April to 347,000 in May, more than 152,000 borrowers had their trial modifications with the program canceled in May, largely because they couldn't document their income or because their income was too high to qualify.

While the administration continues to trumpet the virtues of its housing rescue program, its success is still seen as limited. On the positive side, officials point out that 48.9% of those who didn't qualify for modifications under HAMP were able to work out other loan modification arrangements with lenders, and only 7% fell into foreclosure. In total, nearly 350,000 homeowners have received modification assistance under HAMP. However, the number of borrowers able to qualify for the program is leveling off instead of increasing. Only 30,099 borrowers qualified for trial modifications in May, compared to nearly 110,000 qualifying in December.

The trial modifications last for six months before becoming permanent, giving homeowners a chance to prove that they can handle the new payments. Borrowers generally pay no more than 31% of their pre-tax monthly income toward the loan, which will be set at a fixed rate when the modification is made permanent. Unfortunately, more borrowers are failing to gain permanent modifications after the six-month trial periods. Already, 430,000 have had their trials discontinued – that's more than a third of the trials that have been originated.

Still, in its housing scorecard, the administration maintains HAMP has, on balance, been beneficial.

"The Administration's housing policies, combined with actions of the Fed, have lowered mortgage interest rates, helped stabilize home prices and reduced the rate of foreclosures, repairing some of the damage caused by the financial crisis to the financial security of millions and millions of American families," said Treasury Secretary Tim Geithner. "And the Administration's loan modification programs have given more than a million responsible homeowners a chance to stay in their homes."