Making Home Affordable Program, Mortgage Modification | featured news

Answers to questions about the Obama administration's new mortgage modification program.

The average homeowner in the Obama administration's signature foreclosure-prevention program owes more on their mortgage than the home is worth, yet the program does virtually nothing to address this problem, according to a scathing new report by a government watchdog.

More than 170,000 troubled homeowners are breathing a lasting sigh of relief now that they've received permanent modifications under the Obama administration's foreclosure prevention program.

Only about a third of the homeowners who have successfully completed the trial period of the Obama administration's mortgage modification program have been offered permanent relief, according to new federal data obtained by the Huffington Post.

The conversion rate -- about 33 percent -- is woefully short of what the Treasury Department had forecast. Treasury thought the rate would be "ranging up to 75 percent," Herbert M. Allison Jr., assistant secretary for financial stability, told the Congressional Oversight Panel in October.

The U.S. Treasury said its foreclosure-prevention program has cut mortgage payments for about 947,000 households, at least temporarily.

About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody's Economy.com says. A federal loan modification program is helping a relative few.

The number of homes entering the first stage of foreclosure fell in the fourth quarter compared with the previous quarter, MDA DataQuick says -- a sign that banks are working with delinquent borrowers.

Fewer Californians entered foreclosure during the last three months of the year as bailed-out banks appeared to step up their work with delinquent borrowers, according to data released this morning, although the number of homes taken back by banks rose slightly.

Many critics of the Obama administration's mortgage loan-modification program say it won't work because it doesn't do enough to address "negative equity," the plight of people who owe more on their home loans than the current value of those properties. Without equity in their homes, these critics say, borrowers have little incentive to keep paying and are apt to walk away as soon as things get tough, if not before.

QUESTION 3: I am trying to confirm whether or not participation in the highly touted Mortgage Modification Program will negatively affect my credit report. A friend indicated that she asked her bank this question and they said that it could.

Mortgage servicing companies have the complex task of figuring out if millions of borrowers qualify for mortgage modifications. And there has been some progress lately getting homeowners sign up.