Another ineffective government program...   
      
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   http://finance.yahoo.com/news/Borrowers-exit-troubled-Obama-apf-   
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   Borrowers exit troubled Obama mortgage program   
   Borrowers face foreclosure after Obama loan assistance program fails to    
   provide help    
      
   Alan Zibel, AP Real Estate Writer, On Monday June 21, 2010, 4:34 pm EDT    
   WASHINGTON (AP) -- The Obama administration's flagship effort to help    
   people in danger of losing their homes is falling flat.   
      
   More than a third of the 1.24 million borrowers who have enrolled in the    
   $75 billion mortgage modification program have dropped out. That exceeds    
   the number of people who have managed to have their loan payments    
   reduced to help them keep their homes.   
      
   Last month alone,155,000 borrowers left the program -- bringing the    
   total to 436,000 who have dropped out since it began in March 2009.   
      
   About 340,000 homeowners have received permanent loan modifications and    
   are making payments on time.   
      
   Administration officials say the housing market is significantly better    
   than when President Barack Obama entered office. They say those who were    
   rejected from the program will get help in other ways.   
      
   But analysts expect the majority will still wind up in foreclosure and    
   that could slow the broader economic recovery.   
      
   A major reason so many have fallen out of the program is the Obama    
   administration initially pressured banks to sign up borrowers without    
   insisting first on proof of their income. When banks later moved to    
   collect the information, many troubled homeowners were disqualified or    
   dropped out.   
      
   Many borrowers complained that the banks lost their documents. The    
   industry said borrowers weren't sending back the necessary paperwork.   
      
   Carlos Woods, a 48-year-old power plant worker in Queens, N.Y., made    
   nine payments during a trial phase but was kicked out of the program    
   after Bank of America said he missed a $1,600 payment afterward. His    
   lawyer said they can prove he made the payment.   
      
   Such mistakes happen "more frequently than not, unfortunately," said his    
   lawyer, Sumani Lanka. "I think a lot of it is incompetence."   
      
   A spokesman for Bank of America declined to comment on Woods's case.   
      
   Treasury officials now require banks to collect two recent pay stubs at    
   the start of the process. Borrowers have to give the Internal Revenue    
   Service permission to provide their most recent tax returns to lenders.   
      
   Requiring homeowners to provide documentation of income has turned    
   people away from enrolling in the program. Around 30,000 homeowners    
   started the program in May. That's a sharp turnaround from last summer    
   when more than 100,000 borrowers signed up each month.   
      
   As more people leave the program, a new wave of foreclosures could    
   occur. If that happens, it could weaken the housing market and hold back    
   the broader economic recovery.   
      
   Even after their loans are modified, many borrowers are simply stuck    
   with too much debt -- from car loans to home equity loans to credit    
   cards.   
      
   "The majority of these modifications aren't going to be successful,"    
   said Wayne Yamano, vice president of John Burns Real Estate Consulting,    
   a research firm in Irvine, Calif. "Even after the permanent    
   modification, you're still looking at a very high debt burden."   
      
   So far nearly 6,400 borrowers have dropped out after the loan    
   modification was made permanent. Most of those borrowers likely    
   defaulted on their modified loans, but a handful either refinanced or    
   sold their homes.   
      
   Credit ratings agency Fitch Ratings projects that about two-thirds of    
   borrowers with permanent modifications under the Obama plan will default    
   again within a year after getting their loans modified.   
      
   Obama administration officials contend that borrowers are still getting    
   help -- even if they fail to qualify. The administration published    
   statistics showing that nearly half of borrowers who fell out of the    
   program as of April received an alternative loan modification from their    
   lender. About 7 percent fell into foreclosure.   
      
   Another option is a short sale -- one in which banks agree to let    
   borrowers sell their homes for less than they owe on their mortgage.   
      
   A short sale results in a less severe hit to a borrower's credit score,    
   and is better for communities because homes are less likely to be    
   vandalized or fall into disrepair. To encourage more of those sales, the    
   Obama administration is giving $3,000 for moving expenses to homeowners    
   who complete such a sale or agree to turn over the deed of the property    
   to the lender.   
      
   Administration officials said their work on several fronts has helped    
   stabilize the housing market. Besides the foreclosure-prevention plan,    
   they cited government efforts to provide money for home loans, push down    
   mortgage rates. and provide a federal tax credit for buyers.   
      
   "There's no question that today's housing market is in significantly    
   better shape than anyone predicted 18 months ago," said Sean Donovan,    
   President Barack Obama's housing secretary.   
      
   The mortgage modification was announced with great fanfare a month after    
   Obama took office.   
      
   It is designed to lower borrowers' monthly payments -- reducing their    
   mortgage rates to as low as 2 percent for five years and extending loan    
   terms to as long as 40 years. Borrowers who complete the program are    
   saving a median of $514 a month. Mortgage companies get taxpayer    
   incentives to reduce borrowers' monthly payments.   
      
   Consumer advocates had high hopes for Obama's program when it began. But    
   they have since grown disenchanted.   
      
   "The foreclosure-prevention program has had minimal impact," said John    
   Taylor, chief executive of the National Community Reinvestment    
   Coalition, a consumer group. "It's sad that they didn't put the same    
   amount of resources into helping families avoid foreclosure as they did    
   helping banks."   
      
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