VOL. 125 | NO. 227 | Monday, November 22, 2010
More Than Half Leave Obama Mortgage-Aid Program
MARTIN CRUTSINGER | AP Economics Writer
WASHINGTON (AP) – More than half of the 1.4 million homeowners who enrolled in the Obama administration's flagship foreclosure-prevention program have fallen out.
The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. But the latest report from the Treasury Department shows that the effort is still plagued by high failure rates.
Approximately 755,000 borrowers, or 54 percent of those who tried to get their payments lowered through the program, have been cut loose through October. That compared to a 53 percent disqualification rate through September.
More than 36,300 homeowners, or 34.6 percent who had enrolled in the program, had received permanent loan modifications and were making their reduced mortgage payments on time. That was up slightly from around 34 percent in the previous report.
A separate report Thursday showed that the number of Americans at risk of foreclosure improved slightly over the summer. The Mortgage Bankers Association said that about 9.1 percent of homeowners had missed at least one mortgage payment in the July-September quarter. That was down from 9.9 percen6t in the April-June quarter and compared to a record high of more than 10 percent in the January-March quarter.
Many homeowners have complained that the government mortgage-aid program is a bureaucratic nightmare. They say that banks often lose their documents and then claim borrowers did not send back the necessary paperwork. The banking industry contends that borrowers are not sending back their paperwork.
Homeowners who qualify can receive an interest rate as low as 2 percent for five years and are given a longer period to repay their loans. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500.
Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork.
Low participation means that the program is likely to cost far less than originally forecast. Though Treasury has set aside $50 billion from the federal bailout fund for the housing relief effort, only about $483 million has been spent, auditors said in a report to Congress last month.
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