Aided Borrowers Defaulting Again
Nearly four years ago, 1.2 million distressed homeowners benefitted from the Home Affordable Modification Program of the Obama administration. Recent reports are now saying that a fourth of that number is re-defaulting again on their loans and a considerable number is at following suit.
The federal watchdog is now saying that there is a correlation between the length of stay homeowners stay in the HAMP program and the chances of their defaulting. Those who have been in the program since 2009 are re-defaulting at an alarming rate of 46 percent.
The program was launched to help borrowers skirt off foreclosure by modifying their payment schemes. The HAMP program made interest rates lower, terms shorter and in some cases even shrank principals. It was indeed quite a boon for those who were unable to come up with their payments.
However, the program, whose goal to help 4 million homeowners avoid foreclosure, is quickly getting farther away from its mission.
According to research, a pattern was discovered: Those who received the smallest loan modification are more likely to re-default. To avoid further dent on the foreclosure rate numbers, the Fed is now looking into ways to modify HAMP.