Home Loan Modifications From Servicers And HAMP–Proposals To End Modification Plan And Possible Changes From Banks

Homeowners who have attempted to avoid foreclosure through the federal home loan modification program have seen varying results as there are homeowners seeing modification efforts that have been able to offer them more affordable monthly mortgage payments, but there are also some individuals who have had a great deal of difficulty when it comes to navigating the waters of the modification program. Due to the fact that the original number of homeowners who were stated to be assisted through the Home Affordable Modification Program have not been reached, there has been a proposal to end the federal modification initiative, however, there have been some opponents of this idea who feel this could be detrimental to the housing market and for homeowners in general, despite the fact that there are problems within the modification plan.

An article reposted on the Department of Treasury website outlined the potential problems that could arise if legislation is passed in Congress that would terminate the Home Affordable Modification Program, but there are officials who feel that these efforts to end the modification plan will ultimately fail due to the fact that the Senate or the President will stop these actions. However, many feel this vote is symbolic of the fact that the modification program has not helped enough homeowners avoid foreclosure, despite the fact that there have been over 600,000 homeowners who have seen modification assistance from this initiative.

While there are some opponents who feel the modification effort has been a waste of money and resources, there have been homeowners who were aided by this program and, in the coming months, there could be more who find assistance directly from either the federal modification plan or servicers, and new reports that have arisen show that there may be changes in not only foreclosure prevention efforts but in practices by major banks when it comes to dealing with negative equity.

A recent report from the Wall Street Journal stated that five of the nation’s largest banks have given a proposal to government officials that could implement certain changes in not only servicing practices by numerous financial institutions, but there are proposals by these officials for banks to offer more principal reductions as a way to “repay” homeowners for any damage that may have been done due to questionable foreclosure practices that were brought to light last year.

The major banks who are being called to discuss this issue are Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup, and Ally Financial’s GMAC Mortgage, and it is hoped that options for mortgage principal write-downs may become more available despite the fact that there are disagreements as to whether principal reductions are helpful for homeowners and generally good practice for the housing market.

While this may not be a option implemented or available for all homeowners who are in a negative equity situation, it’s hoped that these changes will benefit those individuals who may be able to find a more long-term sustainability in terms of their monthly mortgage payment if a principal reduction is used as part of a home loan modification program, but of course, there are financial institutions who have been hesitant to offer these principal write-downs and feel that doing so on a large scale could cause problems for the economy overall.