The federal government has been trying for several years to help consumers with underwater home loans to rectify these problems with a number of initiatives, but new research shows that a large number of those who have received such assistance are now falling behind on their bills once again.
Through the end of March, a large percentage of the consumers who received mortgage alterations through the federal Home Affordable Modification Program in the final six months of 2009 had redefaulted on those loans, according to new data from the Special Inspector General for the Troubled Asset Relief Program’s report to Congress. In all, 46.1 percent of those who received such modifications in the third quarter of that year had redefaulted, and the same was true of 39.1 percent of those who did so in 2009’s final three months. Both rates were up from those observed in 2010.
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However, despite this major problem for the program (which was designed to help more than 4 million consumers modify their home loans as a means of making them more affordable), only about 862,000 nationwide have been able to get their modifications made permanent, the report said. That number could continue falling, however, as long as redefault rates remain anywhere near their current levels. Since the program’s inception, some 312,000 borrowers who received permanent HAMP modifications have redefaulted on their mortgages.
Potentially more worrying for the federal government, though, is that there is almost no data on what is causing these redefaults to happen, because the U.S. Department of the Treasury does not require mortgage servicers to collect this data, the report said. As such, SIGTARP is recommending that more be done to develop an understanding of why and how these incidents take place, as the Treasury is already keeping tabs on what makes HAMP modifications successful. Various aspects of the program won’t expire until as late as 2020, and as such, getting a better handle on what makes its efforts both succeed and fail may be vital going forward.
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HAMP and other federally-run mortgage relief programs have been criticized in the past for not doing enough to help as many consumers as they theoretically could, due in part to rather stringent qualification standards that many experts have said can lead to rejections for even the most troubled homeowners.