Making Homes Affordable

This figure represents trouble for the Making Homes Affordable program. The program has seen as many as 650,000 borrowers enrolled into the initial phase of the program. The program has helped to lower mortgage payments for these borrowers. In fact, the average borrower has seen their monthly home loan payment drop by $640 per month, or around 40 percent.

That initial phase of the program is supposed to lead into a permanent home loan modification. The way it works is that borrowers make three agreed-upon payments, and then submit the proper paperwork to show that they qualify to move forward. Unfortunately, there’s something of a bottleneck. Around 20 percent of homeowners enrolled in the initial phase don’t even make the first home loan payment.

If this trend continues, it means bad news for the program. If borrowers can’t keep up with their modified home loan payments, it will greatly reduce what the program can do overall.

Confusion Abounds

Still, there is some confusion out there about how the program works. Some homeowners are confused about how their payment gets determined, how much they need to pay and when. In other cases, it can reflect the fact that the homeowners financial situation may have drastically changed since they entered the program.

For example, a borrower might qualify for the program based on reduced income, but then be laid off at a later time. This makes it much more likely that they’ll fall behind on their payments. The program is set up to allow only once chance, so if they get behind they can’t reenter the program.

On the Upside

Still, not everyone is pessimistic about the program. Three quarters of people enrolled in the program are on track. The treasury department assumed a redefault rate of around 40 percent, and the actual numbers are not too far off at around 50 percent.