Loan Modification News: HAMP Rejects 70 Percent of Applicants
Six years since the launch of the government's Home Affordable Modification Program (HAMP ) in 2009, a recent government report reveals that 7 in 10 homeowners who apply are rejected. The program of government loan modification helpers was meant to assist homeowners who risk the threat of foreclosure by lowering their monthly mortgage.
Unfortunately, this has amounted to almost 4 million people nationwide who have been given bad news about their ability to modify their loans and keep their homes. So, how exactly does HAMP work?
When homeowners apply for a HAMP loan mod, that application is reviewed by the servicer who runs a standardized calculation to determine if they can expect to receive more money at the homeowner's current rate or with a lowered payment. If the loan servicer would get more money over time by lowering the borrower's payments as oppose to foreclosing and that borrower follows other guidelines, they should be approved under the Treasury guidelines.
What's more is that the servicers are paid for each loan that is modified and if the homeowner keeps in good payment standing under the new loan modification, both the borrower and homeowner receive additional payments. So, why is the percentage of declined applications so high? The following 3 issues have been cited most frequently:
While it was initially announced that $75 billion would be available to fund HAMP, that number was quickly reduced to $29 billion. Quite a strangling reduction in available help for mortgage payments. Even still, with the high rejection rates, there remains nearly $18 million in funds left unspent.
2. Bank Rejections
Of the more than 70 percent of rejected applicants, Chase, Bank Of America and Citi have the highest rejection rates (80%). These big lenders cite poor homeowner income and even misconduct as reasons for denying loan modification help.
3. Servicer Misconduct
According to the same government report, homeowners aren't the only ones subject to misconduct. Loan servicers also are known to be prone to making detrimental mistakes in calculations and as a result many homeowners are denied. The lack of oversight in compliance to the Treasury's guidelines may insure that homeowners continue to lose in the race for modifying loans.
Have you been denied a loan modification through HAMP or one of the banks mentioned here? Contact FAIR Counselors to audit your loan modification and receive a determination quickly!