Mortgage Modifications Slow in First Quarter

The number of permanent mortgage modifications dropped by almost a third in the first quarter this year, according to an alliance of mortgage professionals today.

Hope Now, a group consisting of mortgage serviciers, investors and non-profit counselors, reported that only about 207,000 struggling homeowners had their mortgage loans permanently changed in the first three months of 2012, down 31 percent from the 298,449 modified loans from the first quarter of 2011.

Of the loans modified this year rouhly 147,000 were reworked privately by banks, and 60,225 were modified as part of the Obama administration’s Home Affordable Modification Program (HAMP.)

Overall, the total number of borrowers helped by HAMP is continuing to grow, even if at very slow pace. On Friday, the Treasury Department released statistics showing that as of March the program has helped about 795,000 homeowners stay in their homes when they otherwise might have fallen into foreclosure. That number has grown 12,000 since February’s 783,000 total.

Still, HAMP, which was launched in spring 2009, was originally designed to save as many as 3 million borrowers from foreclosure. And while there have been 1.8 million homeowners who have started the program at some point, only 43 percent of those have made it through. Some didn’t qualify for HAMP’s terms and others were still unable to make payments after trial modifications and had to drop out.

There is still plenty of room for new enrollees, with the government having spent only about $2.9 billion of the $30 billion allotted from the 2008 financial industry bailout. Banks and lenders receive money as incentives every time they help modify a customer’s loan, by reducing payments, lowering interest rates, or reducing principal balances. The last of those is the least popular with only 52,000 borrowers having had their principal cut down, according to the Treasury statistics.

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