The U.S. government's effort to help struggling homeowners is approaching a standstill, and the number of homeowners in ongoing mortgage modifications could start shrinking in several months if current trends continue, according to a ProPublica analysis of Treasury Department data.
A year and a half into the program, the number of homeowners defaulting on their modified loans has been fast approaching the number of new modifications. In September, for example, banks modified almost 28,000 loans, but nearly 10,000 homeowners fell out of the program because they defaulted on their modified payments. Taken together, the programs' growth has slowed by almost a quarter each month since May.
The administration launched its foreclosure-relief effort last spring, looking to help 3 to 4 million homeowners by modifying their mortgages to have affordable monthly payments. Only 467,000 homeowners are in modifications that are still ongoing.
Alan White, a law professor at Valparaiso University, said the problem isn't the rate at which homeowners are redefaulting, which is low compared to other modifications, but rather the shrinking number of new modifications given out by banks. "We need to be modifying 10 times as many a month," he told us.
Across the country, over 5 million mortgages are more than 60 days overdue or in foreclosure, according to Lender Processing Services.
Homeowners report Kafka-esque experiences of lost paperwork, miscommunication and dashed hopes in trying to get help preventing foreclosures. We've recently chronicled homeowner experiences in a series of profiles and a questionnaire. Investors who own mortgages are dismayed as well. The Treasury Department has yet to penalize a single mortgage servicer since the program launched last spring.
Guess which one leads the pack in canceled mortgage modifications? Yep: Charlotte's own Bank of America with 187,189 canceled so far.
Here's PBS' Newshour, earlier this week, on the same topic:
Rhiannon "Rhi" Bowman is an independent journalist who contributes snarky commentary on Creative Loafing's CLog blog four days a week in addition to writing for several other local media organizations. To learn more, click the links or follow Rhi on Twitter.
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