Loan Modifications – Low Numbers and Treasury Leaning toward Short Sales

According to CNNMoney.com, only about 4% of troubled borrowers have received long-term permanent loan modification help under the Obama administration’s foreclosure prevention program.  The number of troubled mortgage borrowers currently in trial loan modifications rose to 697,026, up from 650,994 a month earlier.  However the low numbers of permanent modifications are falling far short of the administrations goal to help 4 million homeowners under the $75 billion plan.  Mortgage servicers have converted only 31,382 people from trial adjustments to long-term assistance as of Nov. 30 and 30,650 people in trial modifications have been denied permanent modifications.  Treasury officials stated the reasons include not making monthly payments on time, not submitting all the necessary paperwork and not qualifying for reasons such as insufficient income.  Much of the blame, according to mortgage servicers, is due to borrowers not submitting required paperwork.  Wells Fargo reports it is taking them 45 days to approve or deny modifications once a borrower file is complete.  “We’re not satisfied yet with how this program is unfolding,” said Treasury Assistant Secretary for Financial Stability Herbert Allison at a House Financial Services hearing.

The good news is that borrowers in modifications are saving an average of more than $550 a month with current modification rates around 5.00%.  While it is reasonable to expect the number of approvals into permanent modifications to increase noticeably as pressure continues to be applied to mortgage servicers, the administration and Treasury are clearly leaning toward encouraging short sales as described in my post at:   http://www.biggerpockets.com/forums/103/topics/42310-short-sales-encouraged-by-treasury and in the post below