Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice, McClatchy reports.
The reason?
In the fine print of the form homeowners fill out to apply for Obama's program — which lowers monthly payments for three months while the lender decides whether to provide permanent relief — there’s a clause that lets banks reject borrowers without any written notification and move straight to auctioning off their homes without any warning.
The number of homeowners are affected is hard to ascertain because lenders participating in the administration's Home Affordable Modification Program (HAMP) don't provide the government with information about who's rejected and why.
However, all of the affected borrowers made all their payments and completed trial modifications of their distressed mortgages.
To date, more than 759,000 trial loan modifications have been started, but just 31,382 — four percent —have been converted to permanent new loans, a world away from the 75 percent conversion rate President Obama has said he seeks.
Financial reform legislation approved last week by the House includes a provision to require the Treasury Department to publicly release the net-present value (NPV) formula for the Home Affordable Modification Program.
According to Inside Mortgage Finance, NPV disclosure is just one of many aspects of HAMP that community advocates are looking to change.
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