The hard fact is that your mortgage company doesn’t have to do anything to modify your loan. And chances are it’s not going to, either. This is very tricky, especially if you’ve already stopped paying your mortgage and you’re looking at that notice of default or foreclosure notice posted on your property.
Are you still waiting for federal “bailout” or “stimulus” money (a.k.a. “Obama money”) to help save your home?
I can’t believe what I’m hearing from distressed homeowners. The best one recently was, “I’m waiting for my Obama money to come.” The money I am guessing they’re talking about is the failed stimulus package that was designed to help distressed homeowners, also known as the Home Affordable Modification Program (HAMP).
The Obama administration launched the HAMP in March 2009 with the intent of helping 3 to 4 million homeowners modify their loans.
More than two years later, here are the results:
• 2,867,420 delinquent loans were considered eligible for HAMP.
• 1,751,883 trial plans where offered.
• 1,493,107 trial loan modifications were actually started.
• 539,493 are now active, permanent loan modifications.
Sadly, only half a million homeowners (18 percent of those eligible) actually followed through with the trial and got the permanent loan modifications. Don’t get too excited for them, though. Twenty percent of those permanent loan modifications are now 60 days delinquent. Statistics show that one out of every five homeowners who received a loan modification were at least 60 days late on their new modified loan.
The U.S. Treasury Department stated that HAMP had a re-default rate average of 20.44 percent after 12 months, 15.9 percent after nine months, 10.7 percent after six months and 4.6 percent after three months. This goes to show that a government bailout is never a guaranteed solution for your problems, no matter what they promise.
There have been a total of 531,630 permanent loan modifications completed as of Dec. 31, 2010. Initially, HAM was expected to bail out three to four million homeowners who were facing foreclosure. If it’s not already screamingly obvious, banks are much more willing to take a home back through foreclosure than they are willing to rewrite a homeowner’s loan and keep them paying every month with a new, affordable interest rate. This might be hard to hear, but banks actually prefer to shut the door in the face of delinquent homeowners.
They have their reasons too. One reason is that banks do not “lend” money out of their existing assets when they create a mortgage for a consumer’s home purchase. The money for a home loan comes from the Federal Reserve Bank and is printed out of thin air and wired to commercial mainstream banks it sponsors. For every dollar a commercial bank holds in its reserves from depositors, roughly nine times that amount can be used for consumer loans, including mortgages. This is called fractional reserve lending; though it should be called fractional reserve “printing.” The mortgage companies hated HAMP, and still do, because it won’t work. People who take on loans they can’t afford are still in a bad loan they can’t afford. Modifications can’t change that and neither can the elusive “Obama money.” I hope information like this helps homeowners wake up and face the facts.
In light of these discouraging numbers, the House of Representatives has already passed a bill at the beginning of this year to end HAMP. It is currently stuck in limbo in the Senate, and the president said he would veto the bill if it hit his desk. The reality is, HAMP hasn’t worked for two years, the banks don’t like the bill, and most consumers don’t qualify for a loan modification. Don’t believe everything you heard on the news and get stuck between a rock and a hard place: foreclosed on, ruined credit and homeless. The banks aren’t coming to bail you out, and neither is Mr. Obama.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.