The number of prime mortgages in foreclosure is on the rise, and unfortunately the government’s Home Affordable Modification Program is not going to be able to save many of those.
A recent study from the Mortgage Bankers Association, 2.45 percent of all prime mortgage were in foreclosure during the third quarter of 2010, up from 2.36 percent the previous quarter and also a new record high.
“Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes,” said Michael Fratantoni, VP of Research and Economics for the Mortgage Bankers Association. “Although the employment report for October was relatively positive, the job market had improved only marginally through the third quarter, so while there was a small improvement in the delinquency rate, the level of that rate remains quite high. As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”
And while delinquencies are going to be holding steady, the Washington Post recently wrote that the government’s foreclosure prevention program now has a failure rate of 54 percent. About 755,000 of the 1.4 million homeowners who were enrolled in the Obama program have now been dropped because of ineligibility or other issues. A dropout rate of more than half the class is not a number that gives much hope to newly delinquent homeowners looking for help.
On the flip side, 34.6 percent of HAMP participants have had their loans permanently modified and are keeping current on their lowered payments. That’s up from 34 percent from the last report.
And also on the bright side, the program is going to cost taxpayers less than originally estimated, because there are fewer qualifying homeowners than the government hoped. So of the $50 billion set aside by the Treasury, only $438 million have been used so far. We’ll take the silver lining where we can get it!