The Obama administration says there has been a significant uptick in the rate at which property owners are being approved for permanent mortgage modifications under a program intended to keep people in their homes.A few months ago, officials at the Treasury Department and the Department of Housing and Urban Development promised to take tough action with lenders and mortgage-servicing companies if they didn't follow through on agreements to modify loans.As recently as last month, reports showed less than 1% of the eligible homeowners had received permanent modifications, though many more had qualified for trial modifications.
The latest report -- for modifications through December -- showed that about 112,000 homeowners nationwide have received or been offered permanent modifications, representing about 3.3% of the eligible total of more than 3 million. While still only a fraction of the total, the report released Friday showed improvement. More than 1 million homeowners have received trial modification offers and just more than 787,000 homeowners have active trial modifications.In Michigan, there were 26,777 trial modifications under way, and 2,326 permanent modifications had been granted. Metro Detroit ranked 10th among metropolitan areas in the nation for activity under the program, with 16,687 trial modifications granted and 1,336 permanent ones.
President Barack Obama announced his Making Home Affordable program last year, intending for 3 million-4 million homeowners to receive lower monthly mortgage payments. By providing financial incentives to lenders and mortgage-servicing companies -- the firms that typically send monthly statements and collect mortgage payments from homeowners -- the administration said it would work to get individual payments down to no more than 31% of a homeowner's income. Some people have been frustrated by the slow pace of lenders and servicing companies to change trial modifications to permanent ones.
Nicole McCoubrey, 32, of Chelsea said she has been grateful for a modification that has reduced her payments by more than $400 a month. But she's been waiting for months for it to become permanent and hasn't been told what her interest rate is or how long the new payment plan will last.“The new form reveals in plain and obvious ways what a consumer’s loan is,” said Brian Sullivan, spokesman for HUD. “These are facts that used to be buried in the fine print. All of the origination and third party settlement costs are clearly spelled out.”The point is to provide transparency about mortgage costs such as pre-payment penalties, fixed versus adjustable rate loans, balloon payments, and closing costs. The regulations are also designed to encourage borrowers to shop their loans.
Local mortgage brokers, lenders and consumer advocates welcome the new regulations. But some are concerned there may be confusion over the next few months. And one Valley company has already designed a “RESPA compliant” calculator.“I think it has been a long time coming and is certainly a step forward,” said Paul Leonard, director of the California office of the Center for Responsible Lending. “The new forms are not the ideal, but they will provide greater clarity for borrowers.”Under the new system, some loan and closing costs cannot increase, including: origination charges; points for the specific interest rate chosen; adjusted origination charges; and transfer taxes.Others can only increase up to 10 percent if the borrower uses companies recommended by brokers and lenders who provided the good faith estimate.
