A new report from the Associated Press says that nearly half of the 1.3 million homeowners who initially tried to get help from the Obama administration’s mortgage relief program have left the program due to difficult paperwork and red tape. The $75 billion program was created to help those at risk of foreclosure avoid losing their homes by lowering their mortgage payments. But experts say it doesn’t seem to be slowing the foreclosure rate.
According to RealtyTrac Inc, there have been more than 2.3 million homes repossessed since the recession began in December of 2007. That number is expected to grow through 2011. “The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” Mark Zandi, chief economist at Moody’s Analytics, told the Associated Press.
Around 630,000 homeowners who tried to get assistance from the government have been cut loose from the program through July, according to a report released by the Treasury Department. The report also says that around one out of three people who started the program are successfully making their payments on time, thanks to permanent loan modifications that lowered their monthly payments. Officials believe that only half a million homeowners will be helped by this government program– a small percentage compared to those have lost their homes through foreclosure or short sale. “We still have a lot more foreclosures to come and further home price declines,” Zandi told the Associated Press. Officials say the government program is too complicated and homeowners often get bogged down with paperwork. But if the homeowner does qualify and complete the paperwork they can receive an interest rate as low as two percent for five years. Those who have made it through have had their payments lowered by an average of $500.
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