Mortgage Modification: Too Little, Too Late

Even as the U.S. Treasury was patting itself on the back for stimulating 500,000 trial mortgage modifications for financially-troubled homeowners, one of its top officials was telling Congress that "more than six million Americans are at risk of foreclosure in the next three years."

Keeping those troubled people out of foreclosure is the objective of the Obama Administration, which ear-marked $75 billion of financial-rescue funds in March 2009 to pay incentives to mortgage servicers who agree to modifications.

The Feds, as well as individual mortgage holders seeking solutions, have not been pleased with the progress of the initiative until now.

The 47 national loan servicers that have signed on for the Home Affordable Modification Program (HAMP) that was launched in February 2009 appear to be dragging their feet in its implementation. Treasury reports that 21 of the servicers had modified less than 5 percent of eligible troubled loans on a trial basis and several had not modified any as of October 2009.

Furthermore, the operative word here is "trial," meaning nobody is sure that the modifications will provide a permanent solution. Trial modifications do not become permanent until the borrower is able to meet three reduced monthly mortgage payments in a row. There is concern that unemployment, which is still on the rise in many places,will push people back into trouble on their mortgages. The indication is that one in three borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again, according to federal findings.

The servicers also are overwhelmed by the volume of applications for modification, leading to all sorts of delays and problems, including what many borrowers consider unjust denial of their petitions for mortgage relief.

Treasury has initiated a monthly report card that "shames and names" mortgage servicing institutions to get them to be more efficient and act more quickly in granting mortgage modifications.

Of Course, that doesn't help the American homeowners who have the sheriff knocking on their door.

And, that's that.