During the past few years as foreclosures have increased we have seen historic efforts by the government, financial services industry and consumer groups to help millions of borrowers stay in their homes.

• According to recently released data by the U.S. Treasury, more than 1.4 million borrowers have had the opportunity to modify their mortgages through President Obama’s Home Affordable Modification Program (HAMP). Lowering monthly mortgage payments has resulted in a median savings more than $527 per month on mortgage payments with an aggregate savings of more than $4.1 billion.
• Despite these results, job retention and growth is vital to economic recovery. Successful loan modifications rely on borrower income and with the unemployment rate in California exceeding 12.5 percent, a large number of borrowers cannot qualify for a modification. Recent U.S. Treasury data indicates that the “loss of income is the primary borrower hardship” leading to residential mortgage default. The same report notes the predominate hardship reason for a permanent loan modification is due to curtailment of income (51.8 percent) and unemployment (5.6 percent). Until there is a rebound in employment, residential mortgage defaults will remain at elevated levels.
• While HAMP and other loan modification programs reduce the mortgage payment to 31 percent of a borrower’s mortgage debt to income ratio, if a borrower is highly leveraged through auto, credit and other consumer debt, this amount may still not represent a manageable mortgage payment.
• In addition to HAMP, many lenders have additional loan modification programs in place, which are separate from the HAMP program, and not reflected in the U.S. Treasury numbers above. The banking industry recognizes that improvements can be made in order to achieve a greater number of modifications and industry is addressing these challenges, however two fundamental issues remain: borrowers who fail to respond to outreach efforts and borrowers who fail to provide sufficient financial information to determine if they qualify for a permanent loan modification.
• The lending industry continues to be innovative in attempting to address these challenges by opening loan modification centers and conducting door-to-door campaigns to follow up with borrowers who have been offered a loan modification yet have failed to respond. Additionally, industry continues to participate in dozens of local town-halls and community forums, a practice that was started about two years ago and helped several hundred thousand Californians stay in their homes.