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Tess Vigeland: It is not often on this program that we urge you to make large purchases on credit, but let me tell you: This is the time to get a mortgage. Rates bottomed out this week to the lowest they’ve been since… bell bottoms, 1971. The average 30-year fixed is going for 4.69 percent. But, for those who already have mortgages and want help modifying them? Well this week the government said its Home Affordable Modification Program, or HAMP, has only helped about 340,000 people. Marketplace’s Stacey Vanek-Smith joins us to talk about this. Hey, Stacey.
Stacey Vanek-Smith: Hi, Tess.
Vigeland: So this drop-out problem is looking pretty bad at this point. Do we have any idea why folks are leaving it?
Vanek-Smith: It is bad. More people have actually dropped out of the program than have gotten their loans modified.
Vigeland: Oh, that’s not good.
Vanek-Smith: No. There are a few things going on here. Some people are dropping out because they’re losing their jobs. Other people are so far underwater that they just don’t want to invest any more money in their homes. There are some problems, though, with the actual program itself. Here’s 52-year-old Susan Warner from Brooklyn Center, Minn.
Susan Warner: It was probably the most painful process I’ve ever gone through in my life.
Vigeland: Ah, I hear the start of a familiar horror story.
Vanek-Smith: Oh yes, you know it. Warner says she was on the phone with her bank every week. She kept talking to different people. She eventually did get a temporary reduction, but it was only a $60 reduction. And eventually she ended up being disqualified from the longer-term program because they said her debt-to-income ratio wasn’t high enough.
Warner: It was kind of torturous, to never know, you know, per month, even to make plans. And I thought I was ahead of the curve. And then four months later, you’re smack in it.
Vigeland: You know, Stacey, this is I think a very common experience for folks who are trying to get their mortgages modified. These stories come in over the transom and they’re all the same — my bank doesn’t know what it’s doing and it’s taken me forever to get anything done, so I give up!
Vanek-Smith: Yeah, HAMP has been notoriously disorganized. The process isn’t streamlined and it’s not mandatory. The banks really don’t have much of an incentive to put the systems in place to make this work.
Vigeland: Well, any success stories that you’ve heard?
Vanek-Smith: Yes, we do have some success stories. I talked to 45-year-old Jo Ann Tesar, she lives in St. Paul. She was paying about $1,400 a month and she got that down to just $900 a month. She actually says she was a little frustrated with the bad rap that the program’s gotten because she says it helped her save her house.
Jo Ann Tesar: We forget that there’s thousands of people that is has helped. I still have a backyard for my grand-kids to play in. I still have home base for all three of my grown kids. That’s what it means to me.
Vigeland: Are there other options for people who are falling behind their mortgages if they cannot get through the HAMP program or any other government assistance?
Vanek-Smith: Yeah, there’s another government program that’s coming online in the fall. It’s called the Principal Reduction Alternative, or PRA. It will actually reduce the principal on your mortgage, not just the monthly payments. So the loan will actually be reset down closer to the current value of the homes.
Vigeland: And that’s something that economists have been pushing for, for quite a while?
Vanek-Smith: Yes and, in fact, housing economist Christopher Thornberg thinks this program’s actually going to work much better.
Christopher Thornberg: They’re getting people back to a zero equity position as opposed to a negative equity position. It’s a better program than what they just put into place.
It is going to be first-come, first-serve though, so people should be ready. If you’re not eligible for PRA, sites like ModifyMyMortgage.com can help you figure something else out hopefully.
Vigeland: Stacey Vanek-Smith, thanks so much for helping us out today.
Vanek-Smith: Thank you, Tess.
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