Muddled Modifications
Homeowners express
frustration with MHA

Editor’s note: C & G Newspapers recently ran a two-part series on the federal Making Home Affordable program, highlighting some of the problems homeowners have faced in seeking mortgage modification. This is the first story of a second two-part series on the subject.

By Christa Buchanan
C & G Staff Writer

The federal Making Home Affordable program hasn’t played out quite as intended.

“Looking at the numbers, the amount of foreclosures is certainly not slowing down — last year was a record year for foreclosures, and the numbers are on track to be even more this year. Whatever they’ve been doing, it’s not working,” said Jeff Marsack, a loan officer with Great Lakes Mortgage Funding in Sterling Heights, of MHA as it stood prior to the March 26 announcement of improvements to the program.

Implemented as part of the Homeowner Stability Initiative of 2009, the $75 billion dollar MHA program is intended to help “as many as 7 (million) to 9 million homeowners making a good-faith effort to make their mortgage payments, while attempting to prevent the destructive impact of the housing crisis on families and communities,” according to the U.S. Department of Treasury’s Financial Stability Plan Oversight Board, www.financialstability.gov.

MHA has two main components: the Home Affordable Refinance Program, which sunsets June 10; and the Home Affordable Modification Program, which helps clients who do not qualify under the Home Affordable Refinance Program — it ends Dec. 31, 2012, and as the more controversial of the two, has been enhanced to help more people.

Through HARP, homeowners who have a Federal Housing Administration Fannie Mae or Freddie Mac secured mortgage and are current on their mortgage — meaning payments haven’t been more than 30 days late in the last 12 months — can refinance their home even when they owe more than what their home is worth, up to 125 percent of current market value; however, it’s all dependent on the mortgage’s current rate and terms.

“HARP is a little simpler — there’s nothing earth-shattering about it; pretty much, you can drop the interest rate, say from 6.5 to 5.5, but that’s not a big change,” said Marsack, noting that he’s helped many clients successfully refinance under HARP.

Meanwhile, HAMP allows homeowners who have experienced financial hardship — job loss, medical expenses, divorce, etc. — and are struggling with or behind on their mortgage payments to modify their mortgage via such measures as lowering the interest rate to as low as 2 percent and extending the length of the mortgage up to 40 years so that the mortgage payment doesn’t exceed 31 percent of the homeowner’s gross income. Among other requirements, homeowners must make all their mortgage payments on time over a three-month trial period to be eligible for HAMP.

The problem is, said attorney Kevin Green of Bashore Green Law Group, being offered a trial modification doesn’t necessarily mean a permanent modification will be extended, even if the homeowner successfully completes the three-month trial period.

The changes to HAMP — allowing unemployed homeowners to enter the program and refinancing upside-down loans, among other tweaks — are intended to improve those problems with the program.

“Participating banks are contractually obligated to comply with these changes. Our compliance agent Freddie Mac works closely with servicer banks to ensure that they are implementing these changes and compliant with all program guidelines,” said U.S. Treasury Department spokesperson Meg Reilly, via e-mail, of how they are working toward ensuring lenders are following through with program guidelines.

“They should call (888) 995-HOPE and ask for their complaint to be escalated if they are having trouble receiving help from their servicer,” Reilly advised.

Green, who is representing local homeowners trying to get MHA modifications, doesn’t think the changes, especially opening up the program to the unemployed, are going to help much, if at all.

“I just think it’s amazing they did that, really,” he said. “They’re not even helping the employed, and now they want to help unemployed homeowners. I think they’re just trying to appease the public, to make people believe that they’re actually willing to help — that they’re actually putting our tax dollars to good use,” Green said.

Marsack, meanwhile, is more optimistic, especially about the prospect of writing down the mortgage principle — lowering the balance of the loan — for homeowners with upside down home values.

“The key there is the write-downs. That’s going to help more people than ever before; it’s going to get people on the bandwagon that they’re finally doing something with the bailout money that’s really going to help — all the little bits, lowering the interest rate, extending the length of the loan, help, but it’s nothing major,” said Marsack. “The write-downs have the potential to make a major impact.”

For more information on MHA, visit www.makinghomeaffordable.gov. For a free consultation and more help, contact a housing counselor via the Federal Housing Administration’s Department of Housing and Urban Development HOPE for Homeowners program, at www.hud.gov/hopeforhomeowners or at (888) 995-HOPE (4673). See next week’s paper or visit our website, www.candgnews.com, for more details on the MHA changes.

Great Lakes Mortgage Funding can be reached at (586) 421-1639. To make an appointment for a free consultation at Bashore Green Law Group, call (586) 803-0500.

You can reach Staff Writer Christa Buchanan at cbuchanan@candgnews.com or at (586) 498-1061.

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