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Loan modifications trials go down

The Fannie Mae headquarters building stands in Washington,

The Fannie Mae headquarters building stands in Washington, D.C., U.S., on Monday, Aug. 9, 2010. Fannie Mae, the mortgage company seized by the U.S. government in 2008, said it would seek $1.5 billion in Treasury aid after reporting a $1.2 billion second-quarter loss on Aug. 5. Photographer: Andrew Harrer/Bloomberg Credit: Bloomberg/Andrew Harrer

Lenders and loan servicers last month reduced the number of loan modification trials that were at least six months old, going from 166,000 to 118,000, according to the latest update on the federal program for distressed homeowners.

The 29 percent drop in “aged trials” reflects pressure from the Treasury Department and the Department of Housing and Urban Development on the mortgage industry to stop keeping people in limbo. The two departments run the Making Home Affordable program, which was started in April 2009 to help lower monthly payments for eligible homeowners.
Long Island borrowers and homeowners’ attorneys have complained about modification trials that went on and on instead of just three months, after which the modification was supposed to be permanent or canceled if the homeowners failed to pay on time.

The number of trial modifications went up last summer after lenders and loan servicers were called in by the White House and chastised for not offering enough modifications. Afterward, the number of trials went up, but Long Island attorneys trying to help homeowners said they noticed some people were being given loan changes that they clearly could not sustain or did not qualify for, and some were eventually denied permanent modifications.

Recently, federal officials began requiring lenders and servicers to verify documentation upfront instead of during the trial period.

The report said that slowed the number of new trial modifications, from 50,000 in June to 37,000 in July, a 26 percent drop.

Despite the issues, federal officials said the loan modification program has made several improvements, from standardizing loan modifications terms to lowering borrowers' payments.

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