Home-loan-modification program remains stalled

The latest data on the federal home-loan-modification program are likely to draw more jeers than cheers. The plan known as HAMP makes many metro Phoenix homeowners angrier than their most recent property valuations.

As of February, 22,209 Phoenix-area homeowners have received permanent loan modifications through HAMP. Those are the total results of a program launched two years ago.

Six months ago, 19,385 modifications to lower struggling homeowners' payments had been completed through the government-backed program, according to the Treasury Department. Even then, it was clear that the plan to help people avoid foreclosure had stalled.

HAMP's poor results are blamed mainly on lenders unwilling to work with homeowners, with lenders instead choosing to foreclose and resell a home for less than half of what was owed on it. There are countless stories in Arizona of borrowers who tried for months to obtain a loan modification or paid for months on a temporary loan modification, only to end up losing their house to foreclosure.

Lenders have pointed the finger at homeowners, who didn't fill out loan-modification paperwork correctly, waited too long to ask for help or simply refused the loan-modification deal that was offered them.

The federal government has tried to remain optimistic about the program, and at various times, even appeared to pressure lenders to work with more borrowers.

When President Barack Obama announced the plan during a speech in Mesa in February 2009, many Arizona homeowners who were dealing with mortgages for more than their home was worth, as well as with drops in their incomes, were hopeful. I was there, and talked to many of those homeowners.

I also had the opportunity that day to ask Treasury Secretary Timothy Geithner how the government would encourage or ensure lenders modified mortgages through the then-brand-new program. The phrase he used was the "carrot-and-stick" approach.

The carrot is government fees of up to $3,000 paid to lenders for every successful loan modification. It was alluded that the stick would be government pressure on banks that took Troubled Asset Relief Program funds. It's now clear that neither approach worked as well as expected.

Foreclosures in metro Phoenix hit an all-time record in 2009. Last year's level was the second worst for the region, despite lender moratoriums.

There are 4,427 active-trial loan modifications through HAMP under way in the area that have the potential to become permanent. There were more than 5,000 foreclosures in Phoenix last month.

Confidence meter

The Arizona Regional Multiple Listing Service has a new index to track the confidence of its members in the housing market and economy. The Consumer Confidence Index, started in December, reached its highest level in April: 71 percent. Home sales in March hit a 66-month high, according to ARMLS.

by Catherine Reagor The Arizona Republic Apr. 27, 2011 12:00 AM




Home-loan-modification program remains stalled