Federal home-loan modifications may be slowing down

The federal loan-modification plan appears to be winding down, based on the latest figures tracking how many homeowners have been helped.

In October, there were 5,489 metro Phoenix homeowners in "trial" modifications, according to the monthly U.S. Treasury report on the Home Affordable Modification Program, or HAMP. In September, there were 6,470 trial modifications under way in the region.

Part of the slowdown could be because of big lenders focusing more of their attention on problems with foreclosure documents from "robo-signers" during the past month. But the problems with HAMP and concern over its effectiveness in slowing foreclosures aren't new.

During the past 18 months, payments on 20,335 mortgages in the Phoenix area have been permanently lowered through the federal program. Nationally, about 520,000 home loans have been modified. About 2.9 million U.S. mortgages are still eligible for the government program.

From April to July, 10,000 HAMP trial loan modifications in metro Phoenix were canceled. Some of those borrowers did receive help from other programs. But many other homeowners were denied permanent modifications after making several months of trial payments.

Some Valley homeowners feel like they were led on with trial modifications under the government's program, when their lender planned to foreclose all along. Lenders defend their trial modifications, saying they didn't know all the rules for the new federal program when it was announced, so they placed many homeowners in temporary modifications to help them avoid imminent foreclosure.

The government requires lenders to reduce payments to no more than 31 percent of the incomes of homeowners in need. On average, loan modifications done through HAMP have lowered mortgage payments by $500 a month.

Forecast

New-home sales in metro Phoenix continue to slow. There were 553 new-home closings in October, compared with 620 in September, according to the "Phoenix Housing Market Letter." Through October, new-home sales are 20 percent behind last year's pace for the same period.

"Foreclosures will be flushed through the system. Inventories will rebalance. Prices will begin to see upward pressure. Legislation will eventually be forthcoming to help defaulters repair their credit. Jobs will flow as business confidence grows with a different and prudent federal attitude," said RL Brown, the newsletter's publisher. "When? Beginning in 2011."

by Catherine Reagor The Arizona Republic Nov. 24, 2010 12:00 AM




Federal home-loan modifications may be slowing down