Mortgage Modification Plan Continues to Produce Limited Results

When President Obama announced the Home Affordable Modification Program (HAMP) in early 2009, he anticipated that the program would help three to four million homeowners nationwide. Under HAMP, eligible homeowners were expected to have the opportunity to modify their mortgages, in an effort to assist struggling homeowners and stabilize the housing market.

According to a recent Congressional report, though, after nearly two years the program has only helped about 750,000 homeowners. Congress originally approved $30 billion for the program, but the report suggests that only $4 billion of that will be used. Clearly the program has not met its projected goals.

What has caused these lackluster results?

The New York Times reports that relatively few homeowners have been able to modify their mortgages because foreclosure is simply more profitable for lenders.

Under HAMP the federal government offered incentive payments to lenders and servicers that agreed to modify loans in accordance with clearly defined guidelines. Despite these incentives, when homeowners fall behind in payments many lenders simply seek foreclosure rather than working with struggling homeowners.

Although the program has not been as effective as anticipated, it may still be a tool for those who are struggling with outstanding financial obligations. Some homeowners have successfully obtained relief through this program, and relief is still available to eligible homeowners.

However, it is also important to remember that loan modification is just one option. In many cases homeowners who have encountered financial difficulties may benefit by filing Chapter 13 bankruptcy. Filing for bankruptcy does not preclude loan modification; homeowners can proceed with loan modification applications while participating in bankruptcy. An advantage of filing Chapter 13 bankruptcy is that it stops collection activity and gives the person filing the opportunity to create a manageable reorganization plan. This plan may also include other debts which may be contributing to the overall financial problem, such as a wage garnishment or tax levy.

For more information regarding the options available, speak with a bankruptcy attorney who has experience handling Chapter 13, wage earner, reorganizations.