Loan Mod Logjam Continues for 265,000 Homeowners
Paul Kiel | 5/30/2010, 10:54 a.m.
Failures Jump for Those Trying to Keep Their Homes
New data released Monday shows that the administration's mortgage modification program continues to be plagued by delays and disappointment for hundreds of thousands of homeowners.
Of the 1.2 million homeowners who have begun a modification in the last year, about 265,000 have been stuck in "trial" periods for six months, double the three months that trial periods are supposed to last.
The number of homeowners dropped from the program also continues to rise, meaning that many homeowners can expect to wait more than half a year for a decision from their mortgage servicer only to then be dropped from the program.
Once they've been denied a permanent modification, homeowners owe the amount they were discounted during the trial. Banks often demand that the entire amount be paid as a lump sum right away or over a short period of time, causing a homeowner's payments to swell beyond the original monthly payment.
What's more, homeowners' credit scores are damaged because trial payments are reported to credit agencies as delinquent or as part of a payment plan.
"Being in a trial modification if you don't get a permanent modification is worse than having not been in a trial modification. Period," said Diane Thompson, an attorney with the National Consumer Law Center. Worse yet, people "may have a hard time finding alternative housing because some renters check credit scores," she said.