Is the government mortgage modification plan worthwhile?

President Obama was really glad to be elected in 2008. He may have been too excited when putting so much money into so much of a stimulus. A home loan refinancing plan through the Federal Housing Administration was one of the first programs called Make Home Affordable. Benefits are rearranged on the loan for everyone between the FHA and loan applicant’s lender. However, the cash advance that was drawn from the Treasury for this program may have been ill spent.

Loan refinancing from Uncle Sam

The Make Home Affordable plan only works one way. In this way, the person has to apply for a loan modification. If the application is accepted, the government, working in coordination with the applicant’s lender, sets up a trial program for a few months. The payments and the loan are restructured on a trial basis, to see if the person can nevertheless meet their payment obligations. The modification can only happen if the temporary refinancing works. It sounds simple enough. Whether or not the modifications are enough will determine if the program becomes permanent. This is what everybody wants to know.

Plan passes less than half

Less than 50 percent, says the Wall Street Journal , of the modifications work. In August, an audit of the Home Affordable Refinancing Program, or HAMP, revealed that only 434, 716 successful permanent modifications have gone through so far. There were 616,839 trial modifications which were canceled. That’s lots of wasted cash. There is a huge risk in applying. This is why many don’t. Debt to income ratios for HAMP participants tends to be at a 63.5 percent average. A person has to have a debt to income ratio of 41 percent or lower to get an FHA mortgage, usually the biggest source of bad credit loans for homes.

Just a little stimulus

Stopping foreclosure was the intent of the plan. Refinancing should be left to the private market thinking about 40 percent of applicants cannot do anything.

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Wall Street Journal

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of applicants result in being able to do nothing and have no change. Maybe this means the private market should the take the program as it is cut}.

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Wall Street Journal

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