Digital News Report – Last week the Obama Administration released their January housing scorecard. Although new and existing home sales are higher, their embattled loan modification program is still facing criticism.
Over the last few years housing prices have declined hitting 1970 levels in some areas. In an effort to slow the decline of home prices, the government initiated a Making Home Affordable Program. The most scorned aspect of the program is the Home Affordable Modification Program (HAMP).
Some critics have claimed the program has been abused by loan servicers, including Bank of America, Wells Fargo and Chase. BofA recently announced their are reevaluating this system to improve it.
In California, an appeals court is allowing a fraud case to move foreword. This case involved U.S. Bank.
After learning that a Los Angeles area resident filed for bankruptcy, the bank filed a motion to lift the stay so they could execute a nonjudicial foreclosure.
After the bankruptcy attorney received notice of the filing by the servicer, American Home Mortgage Servicing, Inc., the homeowner filed for a loan modification. Although the modification was already promised, the serivcers said they couldn’t do anything until their motion to lift the bankruptcy stay is granted.
Forbes calls this “indicative” of the way servicers are operating.
The homeowner delayed the filing of Chapter 13 in hopes of negotiating a modification. But it was too late and the home went to auction the next month.
Many borrowers are seeking loan modifications outside the HAMP program. Some of these modifications are only temporary.
Despite the financial incentives under the HAMP program, servicers continued their foreclosure effort after the trial period. Many modifications never become permanent.
House Republicans have introduced a bill to kill the Obama mortgage modification program. According to one report, more than twice as many applicants have dropped out of the program than proceeded with a permanent modification.
House Representative Jim Jordan (R-Ohio) introduced legislation to scrap the program. The bill H.R. 430, has been dubbed the HAMP Repeal and Deficit Reduction Act of 2011. There are already co-sponsors to the program.
By Tina Brown