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Mortgage Modifications Drop off in July but Improvements Seen in Backlog

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By Mary Ellen Podmolik

RISMEDIA, August 23, 2010— (MCT)—The Treasury Department reported Friday that far fewer delinquent mortgage borrowers received loan modifications through a federal government program in July than they did in June.

In July, almost 37,000 borrowers received new permanent modifications, according to Treasury’s monthly scorecard on the housing market. That compares with more than 50,000 new permanent modifications made in June through the government’s Home Affordable Modification Program.

Meanwhile, the more restrictive requirements that homeowners now need to meet to receive even a trial modification has dramatically shrunk the number of residents who have received them. Half of the 1.3 million trial modifications begun since the program’s inception have been cancelled.

Assistant Treasury Secretary Herb Allison said most cancellations can be attributed to insufficient documentation proving one’s income, missed trial payments or mortgage payments that were already less than 31 percent of a homeowner’s income.

There also has been some improvement in the backlog of modification applications waiting six months or more for a decision. At the end of July, Bank of America and JPMorgan Chase accounted for half of the 118,000 active trial modifications where it was undetermined whether a permanent modification would be made. Allison said decisions on most of those modifications should be made within the next month or so, but he warned that cancellations will exceed the number of new permanent modifications as that backlog is cleared.

“A number of people who got stated income modifications did not meet the qualifications, but most of these people are still being assisted either with a proprietary modification by the servicer, or they’re getting other relief, or they’ve become current in the meantime,” he said.

Through the end of June, the nation’s eight largest servicers have initiated foreclosure proceedings against more than 40,000 homeowners whose trial modifications have been canceled.

(c) 2010, Chicago Tribune.

Distributed by McClatchy-Tribune Information Services.

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