In a recent article, the Wall Street Journal reports that the HAMP Program helps only one in four people who apply for the mortgage relief (click here to see the full article). As a Georgia bankruptcy attorney, I’m surprised that its as high as one in four.
The Journal reports that “just one in four of the 2.7 million homeowners who sought to participate in the Obama administrations’ signature mortgage assistance program have succeeded in getting their monthly payments reduced.” This means that 3 of 4 who needed help did not get it. The Journal quotes Spencer Bachus, a congressman from Alabama, as stating “In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners” (emphasis added by me).
You may ask yourself this question, “how could a government program that is designed to help people lower their monthly mortgage payment be hurting anyone?”
Here is my answer. Let’s say a homeowner from Dalton GA calls their mortgage company and explains that they are having financial difficulty and would like to be considered for a loan modification.
The mortgage company then replies, “I’m sorry. We can’t help you until you are least two payments behind on your mortgage.”
The Dalton GA homeowner then asks, “Are you telling me that I should quit making my mortgage payments so that I can be considered for the loan modification program?”
The mortgage company then responds, “All I’m telling you is that we can’t consider you for the program until you are at least two months behind.”
The Dalton GA homeowner then decides to skip two house payments. As luck would have it, their car breaks down on Walnut Avenue and needs repairs during the same months they skip the mortgage payments. As a consequence, they spend the money on the car repairs. After the call the mortgage again, they are now considered for the program. As part of the “trial” program, their monthly mortgage payment is cut in half for a period of six months. The Dalton GA homeowner makes faithfully makes every single trial payment on time.
At the end of the six month trial period, the Dalton GA homeowners receive a nice letter from the mortgage company telling them that they have been denied a loan modification because their paperwork was not properly completed (even though the homeowners mailed in every paper that was requested). The letter goes on to state that the mortgage company now demands all mortgage payments be caught up immediately or foreclosure proceedings will begin. The Dalton GA client must now come with the two months that were missed in addition to three full months that were not made because of the “trial period.”
I meet with many clients who feel angry and betrayed by their mortgage company because of this common scenario. Its unfortunate that this government program creates these situations.
Fortunately, many Georgia debtors can save their home from foreclosure through Chapter 13 bankruptcy. Chapter 13 can be a great solution for people stuck in these situations.