In a recent post: "Too Little, Too Late," I talked about the minuscule numbers of loan modifications taking place, despite all the Federal encouragement going on. Banks had been offered $1000 per modification given (in addition to all that stimulus money!) and they were still dragging their heels. One caller to Bill Brinker's "Money Talk" radio show described the runaround he was getting after he lost his job and was trying to avoid getting behind on payments by modifying his loan terms...a frustrating process that has been going on for weeks, as he was referred to one source after another.
As part of its effort to expand relief to struggling homeowners, the U.S. Dept. of the Treasury just released the Supplemental Directive for its Home Price Decline Protection (HPDP) program, a component of the Home Affordable Modification Program. HPDP provides additional incentive payments for modifications on properties located in areas where home prices have recently declined. The purpose of the program is to encourage additional lender participation by helping to offset any incremental collateral loss on modifications that do not succeed. All HAMP loan modifications begun after Sept. 1, 2009, are eligible for HPDP payments.
The “pay-for-success” structure of HAMP provides incentives to create sustainable mortgage modifications in a manner most cost effective for taxpayers, but as with the previous incentives, I wonder if it will do any good.
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