Friday, January 15, 2010

Prolonging the Agony

About 25 percent of homeowners who received trial loan modifications through President Barack Obama’s main foreclosure prevention plan are failing to keep up with their new reduced payments, the Treasury said in a conference call today.

At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call and by calculations from government data made by Bloomberg. An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.

Many of these people are still underwater relative to the value of their house and have no incentive to make payments. Others have lost their jobs and can't afford to make payments. Still others are underwater and have lost their jobs.

Foreclosure on these homes would have been best for all. The homeowners could have moved on with their lives, the banks would have marked down the homes and put them back on the market if there was any value at all to them. Instead, the quagmire continues.

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