Mortgage modifications cut mortgage bills by $550 a month

The Obama Administration is saving home owners an average $550 a month with loan modifications, but only 31,382 of a potential 4 million qualified homeowners are actually enjoying the savings.

In its November Making Home Affordable Servicer Performance Report, the U.S. Treasury reported the Home Affordable Modification Program (HAMP) also has more than 697,000 trial modifications underway.

However, there has been some difficulty converting trial modifications into permanent modifications.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. Lower payments can result from a lower interest rate, extended loan term, reduced principal or any combination of those approaches.

"Modifications are the ideal and most economically viable method by which homeowner's can retain their homes. Previously, homeowner's were left to fend for themselves in terms of innocently contacting somewhat shady sources who often collected an upfront fee of between $4,000 to $5,000 and promised to contact the lender directly on their behalf in order to modify their loans and reduce their monthly payment," said Michael D. Rodriguez, broker/owner of Platinum Capital Mortgage & Real Estate in Salinas, CA

Under the HAMP plan, borrowers who sign up for mortgage modifications begin with a trial modification of up to five months.

That gives them time to submit a stack of paperwork, including proof of income, assets, debts, hardship affidavit and other documents, to make the modification stick. The trial period also gives them time to determine if the modified monthly payment is sustainable, according to the Treasury.

The majority of approximately 375,000 borrowers who have begun trial modifications nationwide and are scheduled to convert to permanent modifications by the end of the year, have not completed the paperwork, according to the Feds.

Some delays have also been caused by servicers switching gears with each new federal update or adjustment to the program.

The Feds recently added pressure to help both homeowners and lenders speed up the process.

"I am very pleased that the government has taken a more aggressive hands on approach towards implementing programs such as HAMP to provide an alternative to homeowner's who would otherwise lose their homes to foreclosures," Rodriguez said.

GMAC Mortgage Inc. completed 7,111 permanent modifications, more than any other servicer, followed by JPMorgan Chase & Co., with 4,302 modifications; Ocwen Financial Corp., with 4,252; Aurora Loan Services, 3,622 and Wells Fargo, 3,537.

The trial modification leader was Bank of America with 156,864, followed by JPMorgan, 136,686; CitiMortgage, Inc., 100,126; Wells Fargo, 96,137 and Saxon Mortgage Services, Inc., with 35,565.

"As this report illustrates, struggling homeowners across the country continue to receive immediate relief in the form of reduced monthly payments and a second chance to stay in their homes," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office (HPO).

"Our focus now is on working with servicers, borrowers and organizations to get as many of those eligible homeowners as possible into permanent modifications," she added.

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