Roughly 680,000 of the 2.7 million homeowners who applied under the Home Affordable Modification Program (HAMP) portion of the Treasury’s anti-foreclosure campaign received a permanent loan modification or were still in a trial phase as of December.
And nearly half of the applicants were ineligible from the start, either because they didn’t provide the necessary paperwork, weren’t in imminent danger of default, or because their debt-to-income ratio was too low.
Another 770,000 homeowners were able to begin the program but were later disqualified, mainly for paperwork issues, while a small number were rejected for failing to make trial monthly mortgage payments.
In the southern states of Arkansas, Louisiana, Oklahoma and Texas, nearly 83 percent of applicants failed to complete the loan modification process.
Meanwhile, homeowners in New England saw a national-best rejection rate of 72 percent – similar success was seen in western states like Alaska, California, Hawaii, Oregon and Washington.
Also be sure to factor in a re-default rate of at least 20 percent on these so-called successful loan mods.
700K Foreclosures to Be Prevented by HAMP
In December, a Congressional Oversight Panel concluded that just 700,000 foreclosures will be prevented via HAMP, while Moody’s Analytics said nearly 6.7 million U.S. homes were lost to foreclosure, short sale or returned to mortgage lenders between 2000 and 2010.
Another 3.6 million homeowners could meet a similar fate through 2013.
The good news is that the tax burden tied to the program is much smaller than originally estimated, with just about $1 billion spent so far, well below the $75 billion earmarked.
Last year, proprietary loan mods carried out by banks and mortgage lenders more than doubled the HAMP numbers.
Currently, House Republican Spencer Bachus is calling for an end to the program, with a bill possibly in the works.