President Barack Obama gave just a little bit too much in stimulus programs after the 2008 presidential election. A mortgage loan refinancing program through the Government Housing Administration was one of the first programs called Make Home Affordable. The loan lender of the applicant and the FHA work together. In this time, they work to make sure the loan benefits all parties as best as possible. This was a huge cash advance the Treasury used for the program. Some think the cash went to waste.
Uncle Sam and the way loan refinancing works
The Make Home Affordable program only works one way. In this way, the person has to apply for a loan modification. If the application is accepted, the government, working in coordination with the applicant’s lender, sets up a trial program for a few months. The trial is to see if the person is able to meet all payment obligations with the change. If the temporary refinancing is successful, then a permanent modification is made. It sounds easy. Whether or not the modifications are enough will determine if the program becomes permanent. This is what everybody wants to know.
Half within the plan succeed
Less than 50 percent, says the Wall Street Journal , of the modifications work. Only 434,716 modifications have gone through so far. This is according to an audit in August done for the Home Affordable Refinancing Program, or HAMP. There were a lot that got trial modifications canceled. This was about 616,839 trials. That’s a lot of wasted cash. Also, the people who apply are already at incredible risk. Debt to income ratios for HAMP participants tends to be at a 63.5 percent average. A person has to have a debt to income ratio of 41 percent or lower to get an FHA mortgage, generally the biggest source of bad credit loans for homes.
A little stimulus
This program was intended to help keep individuals out of foreclosure. Modification should be left to the private market considering 40 percent of applicants cannot do anything.
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Wall Street Journal
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of applicants result in being able to do nothing and have no change. Maybe this means the private market should the take the plan as it is cut}.
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Wall Street Journal
online.wsj.com/article/SB10001424052748704075604575356663725805580.html
