By Les Christie
The housing market is gaining strength thanks in part to government programs aimed at helping struggling homeowners, the latest Obama Administration Housing Scorecard released Thursday found.
"The Obama Administration's efforts to speed housing recovery are showing clear signs of traction," said Erika Poethig, Acting Assistant Secretary for the Department of Housing and Urban Development which releases the report in conjunction with the Department of the Treasury.
Home values are back to levels not seen since the beginning of the Obama administration, and the number of homeowners who are underwater on their mortgage is down 11 percent since last year, the report said. In addition, more than half a million borrowers have had their loans refinanced through government efforts like the Home Affordable Refinance Program this year.
"It is clear that we're making progress. But with so many households still struggling to make ends meet, we have important work ahead," Poethig said.
Another boost to the housing market came last April, when the attorneys general of 49 states and the District of Columbia inked a $25 billion settlement deal with the nation's five largest banks over so-called robo-signing foreclosure abuses. That deal is expected to help another couple of million borrowers reduce their mortgage payments.
Since the administration started rolling out its programs in April 2009, more than 5.4 million borrowers have received aid, the Department of Housing and Urban Development (HUD) said.
Here's a rundown of the government's mortgage relief efforts and how they've fared:
Home Affordable Modification Program (HAMP)
Launch: March 2009
Borrowers affected: As of July 2012, there have been 1.9 million trial modifications started. More than 1 million have made the transition into permanent modifications. Some 235,000 of those have been canceled due to re-defaults or because borrowers sold their homes.
This program enables eligible borrowers to lower their first mortgage payments to more affordable and sustainable levels. Lenders receive incentives to reduce mortgage payments for at-risk borrowers; the target is 31 percent of income.
HAMP originally fell well short of estimates that it would lower mortgage payments for 3 to 4 million borrowers. And, many early workouts failed as borrowers soon re-defaulted on their loans.
Track record: HAMP's record has improved and re-default rates have declined, but they're still troubling. As of July, nearly 19 percent of all borrowers with HAMP modifications are at least two payments behind, 12 months after their loans were modified.
HAMP modifications have slowed to a crawl lately, with just 17,000 permanent modifications started in July.
The modifications have led to a total of more than $14.4 billion in lowered borrowers' payments, according to the Treasury Department.
Home Affordable Refinance Program (HARP)
Launch: March 2009
Participants: 1.5 million
This program helps borrowers who are current on their mortgage payments but are having a hard time refinancing their mortgage because they are underwater or owe more on their home than it is worth. The home must be underwater due to falling home prices and the mortgage must be backed by Fannie Mae or Freddie Mac.
Originally, HARP allowed homeowners to refinance if their loan balances were between 80 percent and 105 percent of the market value of their home. But after disappointing initial results, the rule was changed to include borrowers with loan-to-value ratios of up to 125 percent. Later, they removed that cap altogether.
Track record: The changes have helped make HARP one of the more successful government programs. The number of HARP refinancings has accelerated with more issued during the first seven months of the year than in all of 2011.
More than half the loans refinanced in June and July went to homeowners with loan-to-value ratios above 105 percent.
Second Lien Modification Program (2MP)
Launch: April 2009
Participation: 90,000 borrowers
The Second Lien Modification Program provides assistance to homeowners who have second mortgages or home equity lines of credit in addition to their primary mortgages.
Many potential mortgage modifications have hit roadblocks because lenders of home equity loans and lines of credit refuse to cooperate. After all, the first mortgage holder typically gets paid first when an underwater mortgage gets modified and there's often nothing left for the second lien holder.
Yet, second lien holders have to agree to a mortgage modification -- and to take a loss -- before a loan can be refinanced. Under 2MP, the government pays cash incentives to the lenders of the second loans so they will allow the refinancing to proceed.
Track record: So far, only 20,664 borrowers have had their second mortgages completely wiped out by their second loan lenders, with an additional 64,977 receiving a partial reduction in their principals. That's a far cry from the estimated 1 million or more that the program was created to help.
The average amount involved is more than $62,000 for a full elimination of a loan balance and about $8,900 for a partial elimination.
Read the rest of this story on CNNMoney.
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