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Gov’t Program Review

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Posted On: 02/19/2014

Question:

The foreclosure crisis seems to be tapering down. Whatever happened to the government's Making Home Affordable Program?

Answer:

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Until 2009, government efforts to end the foreclosure crisis were a flop.

For instance, the much-publicized Hope for Homeowners Act of 2008 saved 36 homes from foreclosure while the FHASecure program resulted in 4,110 delinquent conventional loans that were converted into less expensive FHA financing.

Meanwhile, millions of homes were lost to foreclosure.

The Making Home Affordable Program began in 2009. It has a number of options, including the Home Affordable Modification Program.

The government reports that between April 2009 and October 2013, more than a million HAMP trials were initiated. In the program, borrowers who can make three consecutive monthly payments (with generally lower costs) then can qualify for a “permanent” loan modification.

The catch is that many troubled borrowers have fundamental economic issues that stem from job loss and reduced income. The result is that many loan modifications have failed: The Federal Housing Finance Agency says, as of September 2013, that 601,542 “permanent” loan modifications had started but about 25 percent defaulted.

In looking at the results from the Making Home Affordable program, there are several conclusions.

First, when compared with earlier federal efforts to save homes from foreclosure, the Making Home Affordable program is a massive improvement.

Second, while the stock market reached record heights in 2013, many families have not shared in such prosperity. For instance, the Census Bureau reports that 2011 incomes were 8.9 percent lower than in 1999. Even with the chance to refinance at lower monthly costs, many households simply do not have the financial ability to make even smaller housing payments.

Third, the foreclosure crisis would have been worse – a lot worse – without HAMP and the other programs established under Making Home Affordable. The result would have radiated through the economy in the form of more foreclosures, lower home prices and higher unemployment.

Loan modifications are still available for many borrowers. For details, go to MakingHomeAffordable.gov. There is no cost to participate in these programs.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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