Foreclosure prevention program losing its punch

Foreclosure prevention program losing its punch
By Tami Luhby, senior writerAugust 20, 2010: 12:28 PM ET

NEW YORK (CNNMoney.com) -- The president's signature foreclosure rescue plan is losing its punch, according to a federal report released Friday.
Only 36,695 troubled homeowners received long-term mortgage modifications in July under the Obama administration's Home Affordable Modification Program, known as HAMP. This brings the total to 434,717 borrowers who have successfully made it out of the trial phase.
A month ago, 51,205 delinquent borrowers were given long-term assistance.
The number of people falling out of the program, however, is on the rise. Some 12,912 homeowners had their permanent modifications canceled in July, 272 of whom paid off their loans.
Obama officials acknowledge that the foreclosure rescue program will not help every troubled homeowner and that it may be a while before the housing market stabilizes. They are shifting their focus to initiatives that are targeted to those who have been hit by the recession and declining home prices.
"While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said Raphael Bostic, assistant housing secretary. "We know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation's hardest hit neighborhoods."
Foreclosure prevention programs have taken on renewed importance with the housing market on shaky ground again. A spike in foreclosures, combined with weak housing sales, could send home prices plummeting again.
Defaults on the rise
The latest report comes two weeks after the government had to revise its June redefault figures sharply higher, after analysts called the initial numbers misleading.
The revision showed that nearly 20% of homeowners were at least two months delinquent nine months after receiving a permanent modification. The initial figure showed that 7.7% had fallen behind.
The government did not provide redefault statistics for July in the current report. Officials said the data would be released quarterly.
Analysts at Barclay's Capital said last month said 60% of homeowners may ultimately redefault.

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