Obama Loan Modification Program Backfires

[The Straight Story]

Obama Loan Modification Program Backfires
Monday, May 17, 2010

More than 100,000 Americans who entered into a home mortgage modification program created by the Obama administration have found themselves kicked out of the relief effort, making their lives worse than if they had never bothered to get involved in the first place.

Under the program, homeowners agreed to make timely payments at a reduced rate until the trial period ended, after which the modified payments became permanent. But for those who don’t make the cut at the conclusion of the trial period, banks suddenly demand payment of the amount that was discounted, often in a lump sum. Participants rejected from the program also have taken hits to their credit ratings because the trial payments can be reported as delinquent.

The number of those in this terrible situation is expected to rise. Of the 800,000 Americans who were granted trial modifications, anywhere from one-third to one-half are expected to be rejected, according to the Department of the Treasury.

http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Obama_Loan_Modification_Program_Backfires_100517

[havocmom]

1. !

:popcorn:

[w4rma]

2. This is what happens when the DLC is in charge and writes bills like the banks want them written

(with huge money making -- for them -- loopholes)

[depakid]

11. +1

Right to rent with an opportunity to redeem in 5 years was the rational and effective policy to have pursued.

[guruoo]

3. You have to make the reduced payment during the trial to stay in the program

[Froward69]

4. the flaw was in trusting the banks

to be honest and straight forward in actually helping people.

[mopinko]

5. how are they worse off? they were headed to a foreclosure anyway

they got to stay in their homes a few more months. if they couldn't make the reduced payments, they would have been out of the home if they had had to make the full payment.

[The Backlash Cometh]

6. That's how I see it.

[laughingliberal]

7. Untrue.

The programs to help homeowners, by and large, were for those who had not fallen behind yet and were not for the seriously delinquent. A whole lot of people who were still making their payments but were struggling were applying to get their payments down and ease the financial crunch.

[guruoo]

8. We're 6 months behind, and they say we still qualify for the program.

Long story short, we decided that the best option for us was to cut our losses asap, which meant
moving to a smaller place and letting the mortgage company have the old place in lieu of paying it off.

[laughingliberal]

10. Depends on the program, I guess

I clearly recall the first $75 billion was given for a program which, by and large, was for those who were struggling but not seriously delinquent. I can easily see how some who applied and were not behind yet have now been hurt by the banks deciding they did not qualify for a permanent modification, demanding the 'delinquent' payments, and reporting them as delinquent when they can't come up with the additional money. Yes, some are worse off than if they had not attempted to work with the banks.

[guruoo]

13. Oh, the mortgage co. is practically begging us to take it...

we moved, and told them they can have the old house in lieu of payment.

[Robb]

9. They're worse off because they are poorer for the experience.

Banks are obligated to pursue a parallel foreclosure process, even during the trial payment period.

They do not buy themselves any more time in the house than if they were paying nothing.

[guruoo]

12. The key is to enter the program before you lack enough $ to make the reduced payment

Oh, if I had only known then what I know now!
Easy to say, isn't it?

[mopinko]

14. depending on the judge, tho

i would have to assume that participation would buy you a continuance or 2. i have been looking at some foreclosed property, and any good faith effort seems to get a continuance.