Foreclosure Prevention Solution Sputtering?

Posted on 17 December 2009 by Aaron Hofmann

It’s pretty clear that the goverment’s foreclosure solution is not working based upon data released last Thursday. The government program is known as Making Home Affordable. So far, only about 4 percent, or 31,382, of the 728,000 homeowners currently in the program have moved from the initial, or “trial” phase, to a permanent loan modification.

Compare that with the nearly 4 million homeowners that have received notices of foreclosure this year.

The struggles of the program have led the Obama administration to change its strategy for fixing the foreclosure problem, that many feel if not fixed quickly will destroy any momentum currently seen in the economy.

Treasury officials have warned lenders that they could face penalties if their performance in the program does not improve. About 21 percent of the homeowners enrolled in the program have made their payments and submitted all required documents, but are waiting for their mortgage servicer to move them into a permanent modification, according to the Treasury.

Wells Fargo has moved about 3,500 homeowners into a permanent modification under the program. Bank of America has modified more than 157,000 loans, but fewer than 100 homeowners have received permanent modifications.

Lenders say the backlog can be blamed on the significant amount of required paperwork, which includes hardship statements, pay stubs and bank statements. Approval can be held up by the lack of a single signature.

Homeowners are continuing to grow weary of the soft-shoe routine provided by lenders as they continue to ask for documents, lose documents and drag out the process for months. Homeowners trying to find a solution are often left scratching their heads wondering how the process can be so bad if the lenders are really committing resources to addressing applications.

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