Economix: The Failure of Mortgage Modification

Steven HorwitzYou may recall that one of the Obama Administration's attempts to deal with the mortgage crisis was to create the "Home Affordable Modification Program" to help underwater mortgage holders to modify and renegotiate the terms so that they would be able to make payments and avoid foreclosure.  Supporters hailed this as good policy, while critics suggested it was yet another government bureaucracy that would inevitably fail at the task.  Wanna guess who was right?

Sol Palha submits:The government’s mortgage-modification program has left some struggling homeowners worse off than they were before.

ContributorNetwork - The Associated Press reported recently that nearly half of all enrollees in the Obama administration's flagship mortgage-relief program have dropped out. A CNN Money report on Monday lauds the nation's banks, suggesting that while the government Home Affordable Modification Program is failing, banks are stepping up with their own modification terms to rescue financially strapped homeowners from foreclosure.

The mortgage modification program is extended another year and expanded to include investors.

Felix Salmon submits: If there’s one consistent villain in the tale of attempts to minimize home foreclosures, it’s the loan servicers.

Among the major changes made to the much-criticized Home Affordable Modification Program is a set of new incentives for lenders to reduce the principal on so-called underwater mortgages. Obama administration officials on Friday ramped up their attempts to help struggling homeowners, announcing major changes to the government's much-criticized $75-billion program to modify mortgages to avoid foreclosures.

A high percentage of owners who take part in the Home Affordable Modification Program are unable to maintain their loan mods, data show.Financially strapped homeowners who are close to foreclosure may want to face the music now rather than continuing to struggle with their monthly payments.