Government Housing Help Does Not Meet Expectations

The government set expectations too high earlier this year when money-graphics-2008_870659aPresident Barack Obama launched an effort to help up 7 to 9 million homeowners avoid foreclosure.

Now, reality is setting in. The effort, named Making Home Affordable, appears on pace to make a far smaller impact on the foreclosure crisis than officials had anticipated.

Meanwhile, foreclosures remain extremely high. More than 358,000 foreclosure-related filings were recorded in August, RealtyTrac Inc. reported Thursday. That number was up 18 percent from a year ago and flat from a month earlier.

Following are a few questions and answers about the status of the foreclosure-relief plan.

How many borrowers have been helped by the government programs so far?

As of last month, more than 360,000 borrowers were enrolled in three-month trial loan modifications, out of about 570,000 who received offers. Only about 85,000 homeowners have had their loans refinanced under the Obama plan.

What’s the difference between a refinanced loan and a modification?

When you refinance your home loan, you sign a new contract with your lender. A loan modification involves changes to the existing contract such as lowering the interest rate or extending the term from 30 years to 40.

Why has progress on loan modifications been so sluggish?

The program requires big changes for the mortgage industry. Modifying thousands of loans is much more complicated than collecting payments from borrowers who pay their bills on time. It means hiring and training thousands of workers to handle calls, and reworking computer systems. Plus, the government has changed and expanded the program several times.

Is the Obama administration planning any big changes?

It’s not clear. But industry executives say they want to work on a possible extension of the program to unemployed homeowners. One way to do so would be to give those borrowers a temporary break on loan payments while they look for a new job.

What should I do if I’m having trouble getting help with my mortgage?

If you can’t resolve your problems or you think your mortgage servicer is violating your rights, contact a nonprofit housing counselor or seek legal help. Housing counselors will help negotiate a loan modification for free. Be wary of loan modification consultants that offer to re-negotiate your mortgage in exchange for an upfront fee.

If you want to know whether you qualify for a loan modification, check out the government’s Web site, www.makinghomeaffordable.gov. To find a housing counselor, try NeighborWorks America’s site at www.findaforeclosurecounselor.org.

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