John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Fewer homeowners in Colorado were enrolled in the Obama Administration’s largest program to combat foreclosures in October than in October 2009, shows a review of data by InsideRealEstateNews.There were a total of 8,887 Colorado homeowners in participating in the $75 billion Home Affordable Modification Program, or HAMP, 8 percent fewer than the 9,657 enrolled in either the required “active trials” part of the program and in the permanent modification portion, in which interest rates are typically drastically reduced to help homeowners make their payments. A year ago, the government did not differentiate between the two aspects of the program.
Fewer in Active Trials
The most recent data shows that there were 2,002 homeowners in Colorado enrolled in the active trials, a 9.6 percent drop from the 2,216 enrolled in September. The number of people in the active trials in Colorado and the nation, has declined each month since the Treasury Department earlier this year advised loan servicers to pre-screen individuals to improve their chances of being accepted into the permanent program.
The problem is that HAMP was created to address the problem of unaffordable mortgage payments from such things as subprime loans, but more than a year ago, the root cause shifted to unemployment, said Shannon Peer, the director of housing counseling at the non-profit Brothers Redevelopment in Edgewater.
“The HAMP program was designed at a time when unemployment was not the problem,” Peer said. “The housing market, over the last several years, and the foreclosure crisis, have taken several twists and turns. And they can happen really quickly. The problem is that by the time you create one program and implement it, the housing and foreclosure markets already have changed.
No silver bullet
Also, it is too much to expect that one program can remedy the plight of every distressed homeowner, Peer said. He noted that a number of banks have their own proprietary programs to deal with people, some of whom may have been bounced from HAMP. Unfortunately, he said that a number of buyers are not calling the Colorado Foreclosure Hotline, 1-877-601-HOPE, until the foreclosure process already has begun. He said that if homeowners were working toward a loan modification, through HAMP, or another program, in the past they could often have foreclosure sales postponed with only a week’s notice. Now, it typically takes 30 days prior notice or even more, before a bank will stall the foreclosure sale.
Yun: Moral Hazard
Lawrence Yun, the chief economist for the National Association of Realtors, told InsideRealEstateNews last week that distressed homeowners need to initiate the process with banks. “Trying to work something out with FHA or with HAMP is a very difficult, complex issue,” said Yun, before addressing about 800 local Realtors and other real estate officials at the an event sponsored by the Denver Board of Realtors, the Jefferson County Association of Realtors and the North Metro Denver Realtors Association. Other sponsors of the wide-ranging presentation by Yun included Land Title Guarantee, Metrolist and Bank of America. (Land Title is a sponsor of InsideRealEstateNews.)
“Some people who have been responsible and are paying their mortgages, are being denied by HAMP,” Yun continued. “While other people are being told by the banks that they can’t be accepted into the program unless they stop making their payments. It is very difficult for homeowners, because they are receiving mixed signals.” And they take the risk that they will be turned down by HAMP and lose their homes.”
“Many people would like to refinance their mortgages, but cannot because they are under water on their loans,” Yun said. (That means their mortgage is worth more than their home.) He said one thing that should be considered is to reducing mortgage rates for homeowners who are current on their payments, even if they have have no equity in their homes.
Earlier, Ron Woodcock, a broker with RE/MAX Southeast, who works with a lot of short sales, said that he thinks HAMP should eliminate the active trials. “Either give them a permanent modification or not,” Woodcock said. “I’ve had a number of clients that spent three, four or more months in the active trials only to be told by the bank that they aren’t going to be accepted into the permanent program.” Instead, the bank proceeds with a foreclosure. Woodcock said not only is it cruel and frustrating for homeowners, but it wastes valuable time that they could spend on better alternatives.
National snapshot
Nationally, highlights of the most recent HAMP data shows:
- Almost 37,000 new permanent modifications have been stated monthly for the past six months.
- Homeowners in active permanent modifications realize a median monthly payment reduction of 36 percent, or more than $500 each month.
- Servicers have developed “action plans” to resolve the backlog of trial modifications.
- Of the active modifications, 69,000 have lasted at least six months, down from more than 266,00 at the beginning of the second quarter.
- A total of 719,487 trial modifications have been canceled and 36,306 permanent modifications have been canceled.
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