Christian Debt Recovery

Government Debt Bailout Plan

January 15th, 2011 |

Author: Gavin

Profile of a Successful Homeowner under the Obama Housing Bailout Plan

The Obama housing bailout plan, HAMP (Home Affordable Modification Program), have received mixed reviews since last year when it was first implemented. Critics have cited the disappointing statistics that shows how minor a dent the program made against the steadily increasing foreclosures. It was far below what the administration predicted and what the public hoped for. In total, the program has helped only about 340,000 people instead of the 3 to 4 million the government promised when it let out $75 billion from the treasury to cover the cost of the program.

So what could be causing the low numbers? Part of the problem was the lack of insight into what the profile of a successful HAMP applicant would be. In a hurry to keep the numbers impressively high, the administration decreed that proof of income be waived for the trial loan modification. Unfortunately, many of the delinquent homeowners have such a distorted income to debt ratio that majority of the trial loan modifications where bounced back. There were even reports, according to a bailout watch group led by Elizabeth Warren, a Harvard Law professor, that some homeowners who went through HAMP was left paying more than what they initially started with.

There are major overhauls still needed to be implemented in the Obama housing bailout plant. Some are addressing the inevitable foreclosure through short sale option that are less than desirable for lenders and banks but is an option more favorable to homeowners, at least compared to a foreclosure. The government has been handing out incentives for both lenders and homeowners to encourage this option. Changes like these are necessary to address the cases where homeowners have run out of options other than giving up the homes they can’t afford. Not all cases of delinquent mortgage loans are hopeless, of course. Although the successfully and permanently modified loans were just a fraction of the expected number, this means that the program worked for them. What could have set them apart from the rest of struggling homeowners who applied for the program?

Low debt to income ratio
Lenders generally don’t want mortgages modified so homeowners have to do their homework and work on completing their requirements before submitting it to the bank. One of the key requirements lenders will look at is the debt to income ratio where in monthly expenses are pitted against gross income. Monthly expenses that are taken into consideration by lenders are the following: credit card minimum payments, car payments, property tax, and insurance cost. Lenders would like to see at least 50% or less debt to income ratio for loan modification applicants. Income plays an important part in reducing debt to income ratio so homeowners who are fortunate enough to get a second job do so in their determination to keep their homes.

Complete requirements
According to a participant in HAMP, 70% of the potential HAMP applicants are interested in the president’s program but unfortunately, they don’t have the initiative to complete the requirements needed to process their application. Due diligence is required to ensure that the application is considered by the lender.

Legal and professional help
Many successful HAMP applicants were helped by attorneys who specialize in real estate law and had an accountant’s help in dealing with the necessary financial papers like taxes and proof of income. A lot of people think that they can do the modification process alone and that all they need is the Internet. Unfortunately, the Internet does not always contain reliable information. It is important to seek professional advice at least to get successful results.

About the Author

The author is fascinated by things that are simple and minimal. He likes minimalist art, lives a simple lifestyle and writes things that are light and easy to read.

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