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If the present economic environment wasn’t Scrooge enough, just in time for the holidays, it appears the Obama Administration’s Making Home Affordable foreclosure prevention plan has failed to meet its goal of helping millions of Americans avoid foreclosure. In fact, according to a recent Treasury Department report, 27 percent of the 650,000 homeowners taking part in the mortgage modification program are now delinquent on their mortgage payments.  Reflecting the mortgage industry’s aversion to permanently modify mortgages, of that number, only 1,711 participating homeowners attempting to avoid foreclosure have been able to convert their modifications to permanent status. Homeowners facing foreclosure and needing help to secure a loan modification were encouraged to visit http://www.makinghomeaffordable.gov. Crunching these paltry numbers translates into even more disturbing results for many seeking good news about federal mortgage relief and a way to save their homes.  According to Shahien Nasiripour’s recent report in The Huffington Post, results of the President’s $75 billion foreclosure program mean that, for example, out of every 100 homeowners who came to JPMorgan Chase for modification assistance under Making Home Affordable, just 15 have or will likely receive a permanent payment reduction. So, what happened to the other 85? Nasiripour says: “for every 100 trial plans initiated from April through September 2009 under the Home Affordable Modification Program:

  • 29 borrowers did not make all required payments under their trial plan;
  • 20 borrowers did not submit all documents required for underwriting;
  • 31 borrowers submitted all required documents but the documents did not meet HAMP underwriting standards, due to such things as missing signatures or nonstandard formats;
  • 4 borrowers were or are likely to be rejected for undisclosed reasons;
  • 1 borrower will not or is not likely to get their payment lowered.”

This Huff Post data comes from the prepared remarks bank officials planned to make before the House Financial Services Committee. The testimony was posted on the committee's website. To date, critics say the response of legislators and the Treasury Department to this dire news has been sorely inadequate. While several weeks ago mortgage lenders were threatened with losing access to precious incentives if they didn’t increase permanent mortgage modifications, with millions of homeowners facing foreclosure, failing banks still received billions in bailout money with no real implications for not helping the same struggling borrowers, and by extension communities, avoid the negative impact of foreclosure.  While the Treasury Department has recently extended the modification program, this system on its own appears to have provided few long-term solutions to this continuing housing crisis. To help homeowners avoid foreclosure in the long-term, industry insiders and other commentators insist legislators will need to force banks to modify mortgages in ways that are affordable over the long-term. Since many the rising numbers of unemployed homeowners are unable to pay their mortgage even with unemployment insurance benefits, one suggested change would be to allow unemployed homeowners a mortgage deferment while they’re looking for work. Homeowners who are having difficulty making their mortgages may be considering filing for Chapter 7 or 13 bankruptcy protection. Another option for legislators is giving the bankruptcy courts the power to modify these same underwater mortgages during Chapter 7 and Chapter 13 bankruptcy. As American homeowners languish waiting for more immediate mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Firm of John T. Orcutt. And to find out more about your bankruptcy options, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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