Just one-fourth of Americans that participated in the Obama administration’s mortgage assistance program were able to get their monthly payments reduced, according to a new analysis of the figures released by the Treasury Department.

Just 680,000 of the roughly 2.7 million homeowners who applied for the Home Affordable Modification Program were able to receive assistance. The rest either failed to qualify or were disqualified from the program shortly after being accepted into the program, according to an analysis conducted by the Wall Street Journal.

Roughly 1.3 million homeowners were automatically declared ineligible, while 266,000 were denied for not not submitting the correct paperwork. Another 255,000 were denied because their mortgages were considered affordable, while many others were denied because they were not considered in danger of defaulting.

To qualify for the program, homeowners were required to:

  • Own a one- to four-unit home that serves as their primary residence
  • Have received their mortgage on or before Jan. 1, 2009
  • Have a mortgage payment that is more than 31% of their gross, pre-tax monthly income, and
  • Owe an amount that is less than or equal to$729,750 on their first mortgage for one-unit property. These limits are higher the more units the property has.

Once a homeowner is qualified for the program, they are then placed on a probationary period between three to four months to see if they are able to make their new reduced payments. Mortgage modifications are made by reducing the rate on the loan to as low as 2%, extending its term to 40 years and either deferring or forbearing the principal of the loan. The interest rate reduction is effective for five years and can be reduced by no more than 1% per year until it reaches the Freddie Mac Primary Mortgage Market Survey rate, which is basically the average rate lenders are charging for their most popular mortgage products.

To date, the program has cost taxpayers just $1 billion of the $75 billion originally expected by the Obama administration. House Republicans are in the process of proposing legislation that would end it, while proponents of the program feel that it has prompted mortgage services to make private modifications in order to assist homeowners struggling with mortgage payments.

Do you think the government should end its mortgage modification program? Let us know in the comments section.

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  • A lender who understands

    I don’t believe any lender should halt the modification program on any loan. It’s a different world today and lender are making decisions based off of decisions made in the past and not looking forward and making decisions that would help the country, in its own way, start to get out of this housing mess. I believe the servicers’ of these loans need to be more honest and tell the customer who actually owns the loan vs. who is servicing the loan. The servicer (depending on the contract it has with the owner) usually has no say on weather a loan will be considered for modification or rejected. OFTEN times the employee who is working for the institution doesn’t have an understanding of how mortgages amortize more less understand how to modify them. They spin the customers until they’re dizzy and then it falls dead. That’s one of the major reason the program has failed so miserably.

  • kls

    I qualify in all aspects but one – I’m unemployed and collecting compensation which is not considered income…. therefore do not meet the income requirements. I was told that if I started to take distribution of my retirement funds, then I could POSSIBLY qualify. I am not ready to tap those funds just to look good on paper. I have an EXCELLENT credit score and am current on my mortgage payments. Rather than help to ease the burden of keeping payments current, two banks would rather see me go delinquent. If I default on my payments, I can then get assistance. Does that make sense? Why not help those who are doing everything in their power to stay above water and be responsible?

  • Moparraw

    NO NO NO the banks need to be responsible for there greed, they say they modified loans no not so much they would rather forclose on people thats the bottom line the goverment needs to keep on them! more loans should be modified!