From the New York Times:

Only one in three homeowners who have signed up for the Obama administration’s mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government’s effort to stem the foreclosure crisis.

The poor results from the mortgage industry drew sharp criticism from House Financial Services Committee members on Tuesday. Since the program was started in March, lenders have made loan modification offers to just 680,000 borrowers, far short of the administration’s goal of up to four million.

Why aren’t two-thirds of the original applicants returning their paperwork? My guesses are either that 1) These people realize that even with the modifications they still can’t afford the home; and/or 2) I am sure there are some who see how far underwater they are in their homes, some homeowners have just decided to mail back the keys.

Here is a quick explanation of the plan:

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after the borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.

Congress’ answer to the “problem”?

But those explanations only prompted House members to threaten more legislation to curb the foreclosure crisis.

Here’s the thing: as cruel as it sounds, these homes need to go into foreclosure in order for the market to reset itself. Statistics show that people who have taken advantage of these programs only delay the inevitable. The economy is in a shambles. Delaying a foreclosure doesn’t guarantee the homeowner a good-paying job with which to pay the mortgage. In the meantime, legislation coming out of government at all levels makes it even more difficult for homeowners to get back on their feet as well as making homeownership even more expensive.

Posted in: Housing Market
Tags: Foreclosure, loan modification, mortgage interest rate, mortgage relief