More Borrowers Quitting Obama Mortgage Program

It seems that borrowers are not satisfied with the efforts of the government to help homeowners who are on the verge of losing their homes. Reports said more than a third of the 1.24 million borrowers who have enrolled in the Obama administration’s mortgage modification program have dropped out.
Data showed that a total of 436,000 people have dropped out of the $75-billion program since it was launched in March 2009. In May alone, some 155,000 people stopped trying to get loan modifications. The number of borrowers, who have received permanent loan modifications, meanwhile, stood at 340,000.

According to market analysts, the program did little to ease the plight of borrowers. “The foreclosure-prevention program has had minimal impact. It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks,” National Community Reinvestment Coalition chief executive officer John Taylor said.

One of the reasons blamed for the high turnaround rate is the documentation of income required for homeowners who want to get loan modifications. To apply for the program, a borrower should submit two recent pay stubs to banks at the start of the process. Because of the new application procedures, the number of borrowers wanting to get loan modifications declined dramatically. According to reports, around 30,000 homeowners started the program in May, down from more than 100,000 people who signed up each month starting last summer.

Industry experts believe that the country’s problems with foreclosed properties could worsen if more people are going to exit the program. They also warned that it could further weaken the housing market and impede with the economic recovery.