Reply #3: Depends upon what you consider "fault" [View All]

[zipplewrath]

A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Many borrowers complained that the banks lost their documents. The industry said borrowers weren't sending back the necessary paperwork.

Treasury officials have directed lenders to shift to a new system. They are now required to collect two recent pay stubs at the start of the process. Borrowers have to give the Internal Revenue Service permission to provide their most recent tax returns to lenders.

The growing number of people leaving the program could lead to a new wave of foreclosures. If that happens, it could weaken the housing market and hold back the broader economic recovery.

Most of those leaving the program were rejected during a trial period lasting at least three months. More than 6,300 dropped out after having their loans modified.

Another 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.

Experts say more borrowers are likely to drop out in the coming months. Some homeowners who owe more on their loans than their properties are worth are likely to conclude that paying an oversized mortgage simply isn't worth the cost.

Even after their loans are modified, many borrowers are simply stuck with too much debt - from car loans to home equity loans to credit cards.

"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."

Different ways to look at this. The program was designed to help a small percentage of people.
Alternately, people who entered were more likely to be beyond help.
Or, there isn't going to be enough modification to make the debt worth keeping.