Loan Modification Delays Slow Down Housing Rescue Plan

President Obama’s loan modification plan has helped far fewer homeowners than expected since the program’s launch in March, officials reported today. According to the report, about 325,000 borrowers have received loan modification offers, a far cry compared to the more than 1 million foreclosures filed in the same period.

Of these, about 160,000 are in the trial or permanent stages, while more than half are still in the offer stage. Officials are still not sure how many borrowers have passed the trial phase and received mortgage modification offers.

The trial phase is a three-month period during which the servicer determines whether a borrower can stay current on the reduced payments. The loan modification becomes permanent once the borrower passes the trial terms.

Experts and homeowners alike point to misleading information and long delays in the process as the main reason for the program’s slow start. Some believe the foreclosures will continue even if the program picks up.

Others insist that loan modifications are simply too labor-intensive. According to Joel Naroff of Naroff Economic Advisors, it mostly depends on how willing or able a servicer is to take on the responsibility. He also added that foreclosures cannot be prevented unless other problems such as unemployment are duly addressed.

The government is now urging participating mortgage servicers to speed up the process by hiring more staff, improving training, and expanding their call centers. It also plans to start publishing monthly reports on each servicer’s performance starting August 4. The 27 servicers are expected to discuss the plan with officials in Washington on July 28.