The Obama administration reached its goal of signing up 500,000 borrowers for its foreclosure prevention program three weeks early, government officials said Thursday morning.
The program, known as Making Home Affordable, got off to a bumpy start when it was launched in March, prompting the administration to set a goal of helping 500,000 borrowers by Nov. 1st. Under the $75 billion government program, lenders are paid to lower borrowers’ mortgage payments and the administration has said it will help up to 4 million borrowers before expiring in 2012.
“We’re very pleased to have reached this goal of half a million borrowers almost a full month ahead of target, but we obviously have a lot more to do,” Shaun Donovan, secretary of the Department of Housing and Urban Development.
Senior industry executives are meeting with Treasury officials to discuss progress on the program Thursday afternoon. The Treasury Department will also issue its monthly report card ranking lenders’ performance on the program.
Some lenders are already trumpeting their progress. Wells Fargo said it had nearly doubled the number of modifications it started last month to 62,989. “To help Americans coping with this tough economy, we continue to work hard at keeping people in their homes,” Mike Heid, co-president of Wells Fargo Home Mortgage, said in a statement. Using the government and other loan modification programs “there is still much work ahead to preserve homeownership and to further reduce the number of foreclosed ad_icon
Bank of America said it had helped 95,000 borrowers under the program so far, and was on track to help 125,000 by November. “We feel really good about the momentum,” said Steve Bailey, Bank of America’s home retention strategies and policy executive.
The government program has likely depressed the number of foreclosures this year by about 7 percent to 8 percent during the last six months, said Paul Dales, U.S. economist for New York-based Capital Economics. But some of the borrowers helped by the program may have been able to avoid foreclosure on their own and others may still default on their loan later, said Dales.
“What it won’t do is stop foreclosures from rising,” Dales said. “It will just rise by less.” But not all parts of the government program are operational. After announcing in April that borrowers with a second mortgage could see payments on those loans reduced significantly as part of the program, the administration has yet to sign contracts with lenders to implement it. Homeowners and consumer groups continue to complain that qualified borrowers are being rejected by lenders and that there isn’t a clear appeals process.
The administration has said lenders would be eligible for incentive payments under the program if they signed up borrowers to Hope for Homeowners, which refinances distressed borrowers into cheaper mortgages. But unlike a traditional modification, this program lowers the borrower’s principal balance, potentially providing equity to hundreds of thousands borrowers who owe more than their home is worth because of falling home prices. But months later, the Hope for Homeowners program has not been relaunched.
It is also still too early to tell, for example, how many of those borrowers will make it through the trial period of a modification, the first three months, or might redefault on their loans later, a senior administration official acknowledged. Under pressure to accelerate progress on the program, it will be critical to determine whether all of the modifications can be maintained, said Howard Glaser, a housing industry consultant and a housing official during the Clinton administration.
“I think there is no question that loan modification efforts have accelerated. They are moving at a respectable clip,” Glaser said. “That said, when the numbers come out they are going to require some scrutiny to make sure they are sustainable modifications being made.”
