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Digital News Report – Although the Obama loan modification program was enacted with good intentions, it isn’t for everyone. According to published information on the Making Home Affordable website, the goal of the program was to save homes from foreclosure and slow the decline of home prices.
Not everyone is able to qualify for the Home Affordable Modification Program (HAMP), and for those able to qualify, the discounted payment is not low enough. Declining home prices and the economic recession have put many Americans in a bind.
One story from Montana describes a homeowner who lost his business and needed help. Because the loan was FHA insured, Wells Fargo was only able to discount his payments $124 per month. That was not enough. The owner lost the house which he owed $220,000 on and the Housing and Urban Development (HUD) department paid the bank loan off. Now HUD is offering the home for sale at $88,000.
Contractual restraints, even those involving government contracts covering FHA financing, can get in the way of loan modifications. According to a NPR report, it is easier to modify a non-FHA loan than a loan backed by the government.
During the Great Depression of the 1930s some states began loan modification programs. During this “Great Recession”, the federal government began offering incentives to the banks to modify contractual agreements.
There have been problems with the government program. Numerous state Attorney Generals have received complaints from homeowners. Homeowners complain that the banks are treating them unfairly. The Attorney General of Arizona has filed suit against Bank of America. The Nevada AG has filed a similar suit.
There are class action lawsuits popping-up against Bank of America and other lenders. In some instances, the loan modification was approved, payments were made during the trial period, but the modifications never became permanent.
There are other class action suits against Wells Fargo and JPMorgan Chase. But this may be too late for many homeowners.
Despite the problems, there have been successes. “Since taking office in 2009, the Administration’s efforts have helped millions families stay in their homes and helped millions more refinance, but the data clearly show that the market remains extremely fragile”, the Obama Administration said in a statement.
By Tina Brown