All over the country, foreclosures are up for the 9th straight quarter. A report last week by the Mortgage Bankers Association listed that 14 percent of homeowners with mortgages are either behind in their payments or headed for foreclosure. In response, it has been announced that there some changes to its “Home Affordable Modification Program,” originally launced in February of this year.  The original program was meant to incentivize the banks to create loan modification programs for those who needed them.  Under the plan, lenders who agreed to lower payments for troubled borrowers were to be paid $1,000 initially for each loan.  That was to be followed by $1,000 annually for up to three years.

The planned changes are supposed to increase transparency and accountability from mortgage companies.  One of these priorities is to put more pressure on lenders by highlighting the ones who are lagging in loan modifications. Another is to delay the cash incentive payments to banks until the loan modifications have actually become permanent.  I think there is a HUGE value to that. As an active professional, I can attest to the fact these modifications are taking an incredibly long time. Homeowners are stuck in a limbo of not knowing if they are facing foreclosure or relief for months at a time. I have had many sellers that were considering a short sale , but prefer to modify their loan if that’s an option. When it takes months for the modification application process, when a homeowner is turned down, they now have thousands of dollars in additional fines that have to be negotiated away.

The original target for the foreclosure crisis had been borrowers who had gotten involved in subprime mortgages. Now this crisis has now extended to those who took out conventional, fixed-rate loans as well.  Due to high unemployment and falling home values, it has even extended to some borrowers who were able to put down a significant down payment on their homes of at least 10 to 20 percent.