Treasury Report: 1 in 4 Loan Modifications Approved

A new Treasury Department report shows that only 25% of HAMP (Home Affordable Modification Program) applicants were successful in getting their monthly payment reduced.

The report was discussed in an article in the Wall Street Journal.  According to the article, almost 266,000 applicants were rejected because they either didn’t submit the necessary paperwork or it was lost by their lender.  This was the top reason for rejection.  Another 255,000 were deemed ineligible because they were considered to have affordable mortgages…the program considers a mortgage affordable if it is less than 31% of pretax income.

But the real issue here is something I’ve written about before…according to the Congressional Oversight Panel, over 1/5 of modified loans return to delinquency (90 days or more in default) within 1 year.  So the problem is not just the lack of approvals for loan modifications, but the lack of long-term success once the loans are modified.

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