Approximately 91,000 homeowners withdrew from the Home Affordable Modification Program in June. That brings the year-to-date total to 530,000 homeowners who have not converted temporary modifications to permanent mortgages.
Since the program’s inception in March 2009, 1.3 million homeowners have started with temporarily modified mortgages. 40 percent of those applicants have dropped out of the program. Only 30 percent of the applicants have converted to permanent mortgages.
The June figures indicate a strong probability of foreclosures at the end of 2010. Banks foreclosed on a record number of homes in the second quarter of 2010 but have slowed foreclosures in order to keep pace with managing the distressed properties. In all, 269,962 properties were taken over by lenders in the second quarter. That represents a 5 percent increase over the first quarter 2010 and a 38 percent hike over the second quarter in 2009.
The Obama Administration has set aside $50 billion for use in the Home Affordable Modification Program. Thus far, only about $200 million has been spent on modifications. What is apparent is that a program designed for providing stressed homeowners a second chance does not work without new employment.
With the majority of troubled homeowners facing mortgages that now exceed the value of the home, many owners are throwing in the towel. In many cases, foreclosure is the option of choice for underwater homeowners.
Frustration with the modification program has opened doors for investors who specialize in REO and short sale purchases. The key to investor success is to have your paperwork in order. Both the REO and short sale processes have improved immeasurably in the past 12 months.
The Obama Administration has recognized the shortcomings of the modification program and has spiced up the short sale process with lender incentives and homeowner relocation allowances. There has never been a more cooperative feel to the short sale process.