Is the federal home loan refinancing program worthwhile?

President Obama was really glad to be elected in 2008. He may have been too excited when putting so much cash into so much of a stimulus. A home loan modification program through the Federal Housing Administration was one of the first programs called Make Home Affordable. The loan is somehow rearranged with the Federal Housing Administration and applicant’s loan lender to make sure the benefit is best for all involved. This was a huge money advance the Treasury used for the program. Some think the money went to waste. Post resource – Is the federal mortgage modification program worth it by Personal Money Store.

Uncle Sam and the way loan refinancing works

Anyone wanting a home modification has to apply for it with the Make Home Affordable program. A trial program is set up for the applicant if accepted to the program with the applicant’s lender. The trial is to see if the person is able to meet all payment obligations with the change. If the temporary refinancing is successful, then a permanent modification is made. It seems like an easy program. However, the question becomes whether enough modifications become permanent to justify the program.

Half aren’t even working

Less than 50 percent, says the Wall Street Journal , of the modifications work. Only 434,716 modifications have gone through so far. This is according to an audit in August done for the Home Affordable Refinancing Plan, or HAMP. 616,839 trial modifications didn’t end up going through. That’s a lot of wasted cash. There is a huge risk in applying. This is why many don’t. There is a high average debt to income ratio for HAMP participants. This is about 63.5 percent. A person has to have a debt to income ratio of 41 percent or lower to get an FHA mortgage, typically the biggest source of bad credit loans for homes.

Some stimulus

The program had one goal. This goal was to stop foreclosure. Refinancing should be left to the private market thinking about 40 percent of applicants can’t do anything.

Further reading

Wall Street Journal

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of applicants result in being able to do nothing and have no change. Maybe this means the private market should the take the plan as it is cut}.

More on this topic

Wall Street Journal

online.wsj.com/article/SB10001424052748704075604575356663725805580.html