People had a lot of expectation from the Home Affordable Mortgage Modification program (HAMP) as introduced by the Obama Government. This program was considered to be an excellent initiative aimed at helping the borrowers residing at some of the the worst-hit states. But is the program a success in reality? Most of the experts do not agree. Check out the 4 reasons why Home Affordable Modification failed:
1. Very few foreclosures were being stopped due to this program:
This program has only helped very few borrowers in stopping foreclosures on their property. In most cases, it was found that banks lost the paperwork of the borrowers. Thus, temporary modifications could not get converted into permanent ones. It has been found in a survey that in case of every 100 foreclosed upon properties, the mortgage modification program could save only 6.
2. The loan modification program can ruin your credit score:
In order to save their properties, a large number of underwater borrowers have applied for mortgage modification. Though most of the lenders give a trial modification program to the borrowers, in most cases, none of them qualify for a permanent modification. However, as the borrowers get a modification, it will have a negative affect on their credit report. Their scores would go down by 100 points. The few borrowers who get a permanent modification will get the chances of improving their scores. However, those who do not get a permanent modification will have to face further blemishes on their credit report.
3. Borrowers won't be able to save much after modification:
There is no fixed amount by which the mortgage needs to be reduced as per the program. Thus, lenders sometimes reduce an insignificant amount which makes little or no difference for the homeowners. Thus, in most cases, after a loan modification, borrowers are facing hardship in paying off the loan.
4. The government may not spend the promised amount:
The government had promised to pay around $50 billion to help the homeowners. However, experts opine that mortgage modification isn't even going to be able to spend the promised $50 billion helping homeowners. They may only spend around 40% of the said amount. The banks may receive their money from the government, but it will be of not much help in reviving the mortgage market.