Mortgage modifications on the rise - East Valley Tribune: News

Mortgage modifications on the rise

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Posted: Wednesday, February 17, 2010 5:30 pm | Updated: 3:46 am, Sat Oct 8, 2011.

The number of permanent mortgage modifications under the federal Making Home Affordable program jumped 75 percent last month nationally and nearly 70 percent in Arizona and the Valley.

A year ago this week, President Barack Obama was at Dobson High School in Mesa to announce federal initiatives to help distressed homeowners and reduce foreclosures. The Making Home Affordable program has been widely criticized for not helping enough homeowners avoid foreclosure.

Nationally, 66,465 permanent modifications were reported last year. January activity brings that total to 116,297.

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However, permanent modifications remain far behind the 1 million trial modifications initiated since the program’s inception, and more than 61,400 homeowners have dropped out of the program.

Through Dec. 31, 4,137 permanent modifications were reported in Arizona, including 3,453 in the Valley. Including January, permanent modifications jumped to 7,000 in Arizona, including 5,834 in the Valley.

The median savings to borrowers with permanent modifications is more than $500 per month.

An estimated 3.4 million mortgages nationally are at least 60 days delinquent and deemed eligible for the modification program, up from 3.35 million as of Dec. 31.

“Our goal has always been to ensure broad access to affordable mortgage credit, stabilize home sales and prices, stem damage to hard-hit neighborhoods, and provide responsible homeowners who are struggling the chance to stay in their homes,” said Meg Reilly, Treasury spokeswoman.

Arizona remains among states with both the highest mortgage delinquency rates and the highest mortgage modification activity under the program.

“(The federal program) was designed to target responsible homeowners who live in their homes and can sustain a mortgage at reduced monthly payment levels,” Reilly said. “Modifications might not be the right option for all homeowners. It is just one program in a much broader strategy to stabilize the housing market.”

All modifications start in a trial phase, she said. If after a three- to five-month trial phase the borrower has submitted all documents, been deemed eligible and stayed current on their monthly payments, the modification becomes permanent, she said. 

“The increase in permanent modifications (in January) is largely due to the high number of people who hit the end of their trial phase,” Reilly said.

Bank of America, one of the largest participants in the federal modification program, says it quadrupled the total number of completed modifications in the past month. More than 12,700 bank customers now have permanent modifications, up from 3,200 as of Dec. 31.

“In the past month, our concerted customer outreach initiative has driven a substantial increase in the rate of conversions from trial to permanent modifications, as we anticipated in our recent reports of (program) progress,” said Jack Schakett, credit loss mitigation strategies executive for Bank of America Home Loans.

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