Among the first announced was a program called Make Home Affordable, which was a mortgage modification plan through the Federal Housing Administration. Benefits are rearranged on the loan for everybody between the Federal Housing Administration and loan applicant’s lender. However, the cash advance that was drawn from the Treasury for this plan may have been ill spent.
Any person wanting a home refinancing has to apply for it with the Make Home Affordable program. If the application is accepted, the government, working in coordination with the applicant’s lender, sets up a trial program for a few months. The trial is to see if the person is able to meet all payment obligations with the change. The refinancing can only happen if the temporary refinancing works. It seems like an easy program. Many wonder if the program should become permanent or of the modifications aren’t working.
Half aren’t even working
Less than 50 percent, says the Wall Street Journal , of the modifications work. Only 434,716 modifications have gone through so far. This is according to an audit in August done for the Home Affordable Modification Program, or HAMP. There were a lot that got trial modifications canceled. This was about 616,839 trials. That is lots of fast cash down the drain. Anyone applying gets put in risk. The average ratio of debt to income for HAMP participants is 63.5 percent. Usually bad credit loans for homes are those with 41 percent or lower debt to income ratios, which is how much is needed for an FHA mortgages.
Too much stimulus
The plan had one goal. This goal was to stop foreclosure. About 40 percent of applicants result in being able to do nothing and have no change. Maybe this means the private market should the take the program as it is cut.