According to recent report on the federal government's foreclosure-prevention effort, the number of homeowners leaving the program exceeds the number of homeowners receiving new loan modifications.
More than 91,000 homeowners cancelled their government loan modifications in June, while just 38,728 received new modifications, according to data released Tuesday. Almost 530,000 of the nearly 1.3 million government modifications have been cancelled since the program began last March. Dropouts climbed as homeowners missed payments on their modified loans or failed to turn in required paperwork.
But according to the administration, nearly half of the homeowners who "cancelled" their trial modifications have found mortgage relief outside the program and that than 2% of cancellations have resulted in foreclosure. When looking at the way that the administration talks about this foreclosure prevention program is just simply troubling. First of all the homeowners did not "cancel" their mortgage modifications. When they use the word "cancel" it sounds as if the homeowners called up and said "thanks for the modification; but I don't need it anymore...foreclosure is just fine for me." And we all know that that never happens. The truth is that the foreclosure prevention program is ill suited to tackle the crisis that we're now facing. While at the onset of the foreclosure crisis many of the mortgage loans going into foreclosure were resetting ARMs, now we are looking at a different scenario. While many of the toxic mortgages going into foreclosure are still ARM's many of them are facing foreclosure because the homeowners don't have enough income to pay their mortgage due to unemployment. This foreclosure prevention program must be adapted so that it addresses the biggest issue causing foreclosure now - long-term unemployment. And finally, many of the homeowners avoiding foreclosure after being booted out of the government's foreclosure prevention program are finding mortgage relief by filing bankruptcy. Please let's be honest about what is really happening.