The program puts homeowners into five-year programs with lower monthly payments on their mortgages, but first they must provide proof of income and get through a three-month trial period making all payments on time. About 530,000 homeowners, or about 40% of 1.3 million borrowers enrolled, have had their lower mortgage payments canceled, the Treasury Department reported Tuesday.
An additional 398,000 homeowners, or 30% of borrowers, have received the longer-term lower payments on their mortgages.
To qualify, homeowners must be paying about a third or more of their monthly gross income toward their mortgage. They must have a property value less than about $729,000, and they must have incurred some sort of hardship.
For qualifying homeowners, banks will extend repayment periods, drop interest rates to as low as 2% and, in some cases, reduce the outstanding loan value. Homeowners in the longer-term modifications are guaranteed lower payments for five years, then fixed terms at today's low rates for the life of the loan. The typical homeowner is receiving a reduction in the monthly payment of 36%, or more than $500 a month.
Some economists say few are benefiting from the program. "(It) is not helping a lot of people, but for those that have gotten it, it seems to be working reasonably well," says Mark Zandi at Moody's Analytics. "The problem is not a lot of people are getting it."
Others see progress. The total number of homeowners getting longer-term mortgage modifications increased nearly 15% in June. "The housing market and economy are starting to resolve the issues, thought it's going to take years," says Joel Naroff at Naroff Economic Advisors.
For the first time, the government also detailed how many borrowers with modifications are defaulting for a second time. For homeowners with permanent loan modifications for six months, fewer than 6% are 60 or more days delinquent. Fewer than 3% of such homeowners have defaulted at the nine-month mark.