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Difficulties continue for homeowners seeking loan modifications

For three years, Ohio homeowners have watched the news regarding the housing market collapse and the intense wave of foreclosures that followed. In 2009, the government announced the Home Affordable Modification Program that was intended to help more than 3 million distressed homeowners across the country to stave off foreclosure. Officials say only about a quarter of the intended beneficiaries have found relief through the HAMP program.

Cincinnati bankruptcy attorneys note that the government generally views the HAMP program as compatible with bankruptcy relief, but it is important to speak with an experienced debt relief attorney before making an informed decision on how to proceed. The federal loan modification program encourages loan servicers to cut interest rates on existing home loans, extend the terms of the loans and provide other mechanisms that are intended to keep people in their homes.

One housing expert at the Wharton School says the program "delays resolution of the problem of defaulting loans and it is adding uncertainty to the market." Some of the difficulty leading to uncertainty is that fact that only a fraction of delinquent loans have received modifications under the program. Officials say that roughly one out of every 12 home loans across the country is currently delinquent.

The federal loan modification program has generated numerous stories over the past couple of years of the nightmares some homeowners have experienced while seeking a loan modification. This blog reported a story in November on the difficulties the bank's apparent dual-tracking system has caused. That is the system where the loan servicer works on the loan modification on one track, while the bank continues to pursue foreclosure on a separate track-apparently without internal communications between departments.

Some homeowners have experienced a different issue. Lost paperwork, or the bank's failure to request certain paperwork that ultimately results in a denied modification, is making the news. Housing advocates say that servicers are losing documents, using inaccurate data in denying loan modifications and even approving and denying loan modifications at the same time.

Loan servicers seem to say that they continue to do their job properly. However the banks insist that they are overwhelmed by the volume of homeowners seeking modifications.

Finding meaningful debt relief is important for many struggling homeowners in the Cincinnati area. Homeowners under financial distress, or those facing foreclosure, should consider speaking with an experienced foreclosure and bankruptcy attorney to learn what options may be available in finding meaningful debt relief.

Source: Reuters, "Modification blunders bedevil U.S. housing recovery," Aruna Viswanatha and Xavier Briand, Dec. 19, 2011

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