HAMP Participants Find Credit Scores are Dropping – Gov’t Official Says “HAMP NOT WORKING”
This below is from Bob Massey – Real Estate Wealth Coach that I follow. This email article he sent out is pretty enlightening. Enjoy – Stay Informed!
Kenny
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HAMP Participants Find Credit Scores are Dropping
Many homeowners who tried to do the right thing by saving their home through a loan modification under the Home Affordable Modification Program are being startled by the news that their credit score has fallen by 100 points or so as a result.
What credit counselors say causes this drop is that during the three month trial period lenders mark payments as only partially made. This drops credit because the status is lower than that of someone who continued to make payments as originally agreed upon. Credit counselors and their clients say this is unfair, and certainly creates a surprise result that HAMP applicants never expected when they signed on to the program.
Credit card and credit scoring companies believe the lowered score is fair because filing for a HAMP modification is often the first sign of a credit problem. Credit scores can be built back over time by paying debts fully and on time.
Of course, having a credit reduction of 100 points—something that can definitely hurt when applying for further credit, a job or even insurance—is not as bad as going through foreclosure which on average lowers a credit score by 150 points.
This unanticipated result of the HAMP program is likely to have a political impact for the Obama Administration. HAMP participants feel that they should have at least been warned that a lowered credit score would be the likely result of getting involved with the program, and that warning was never issued until it was too late to help many participants.
Only 170,000 Permanent Loans Under HAMP
The HAMP program issued one bit of good news: permanent loan mods were up 45% in January. The bad news is, this is just a miniscule amount of the 1.8 million homeowners who are behind in their payments in the U.S.
The total HAMP permanent loans processed during the month of January were 170,000 according to the Treasury Department. There are nearly another 92,000 awaiting the homeowner’s signature to move from trial to permanent loan.
Lenders have sent offers to 1.3 million homeowners to start the program, which is less than the government’s goal of reaching out to 3 to 4 million homeowners in potential trouble. The government has until 2012 to reach this goal.
There is still a lot of finger-pointing going on between loan processors and homeowners. Processors claim the problem is in incomplete paperwork. The federal government is patching this loophole starting June 1 by requiring all necessary paperwork to be submitted before a trial loan modification can be started.
Still, by government calculations $2.7 billion has already been saved by approximately 1 million borrowers who have received trial or permanent loan modifications, an average of $500 per borrower.
The five lenders that have completed the largest number of loan modifications—Wells Fargo, Bank of America, JP Morgan Chase, Citi Mortgage and GMAC. Wells Fargo is leading the pack.
Private Loan Modification Agencies are Outpacing HAMP
The Hope Now Alliance is the private sector loan modification alliance of mortgage servicing companies, mortgage insurers and non-profit counseling agencies who are dealing with non-HAMP qualified loans. Primarily these are vacant and investor-owned homes that no longer have a resident owner. According to Faith Schwartz, Executive Director of Hope Now Alliance, approximately 25% of single family homes are owned by Investors who do not qualify for the HAMP program.
Hope Now Alliance closed almost 100,000 proprietary loan modifications during the month of January compared to the Treasury Department’s HAMP Program which closed 50,364. Between the two programs nearly 150,000 loans were modified, but the larger portion of these were by the private program.
Another interesting fact coming out of the private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors is that “99,499 homeowners received proprietary loan modifications for the month. Combined with the United States Treasury’s recently released Home Affordable Modification Program (HAMP) data that showed 50,364 HAMP modifications for January, the total number of loan modifications is almost 150,000 for the month. Most significant in the data is the fact that 74% of proprietary loan modifications done in January, or 73,000 loans, involved reductions of principal and interest payments. These non-HAMP loan modifications also are not taking money from Treasury to subsidize the deals. Private enterprise at work!
Government Official Says HAMP is Not Working
Neil Barofsky, special inspector general for the Troubled Assets Relief Program (TARP), admitted that far fewer homeowners will receive assistance under the HAMP program and other government efforts to ease foreclosure than originally estimated. Barofsky estimates that only 1.5 million to 2 million homeowners will be helped as opposed to the 4 million originally expected to receive foreclosure help from the government.
Barofsky does not believe offering modifications is a meaningful goal of the foreclosure program, since so few have actually been helped and many who have received modifications are redefaulting.
Herbert M. Allison, assistant Treasury secretary for financial stability said the program should be measured not just by the number of permanent modifications made, but also by the assistance given to provide Deed in Lieu of Foreclosure and Short Sale assistance.
Obviously, the enhancements to the HAMP program announced on March 26 are an indication that new strategies and incentives are needed if millions of people are going to be helped to avoid foreclosure.
Have a great evening!
Bob Massey
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If you’d like to discuss your personal situation to learn what options are available to you, give me a call at 702-204-3945 or you can contact me via email kenny@tfmcpartners.com or by leaving a comment below.
Kindest Regards,
Kenny Wagner
The Foreclosure Mitigation Company
P: 702-204-3945
Categories: Loan Modification