What’s a Troubled Homeowner to do?

Because you generally cannot modify your mortgage on your primary residence in a bankruptcy case, I often suggest that people who are most troubled by their mortgage debts seek assistance outside of bankruptcy.

I had high hopes for the Obama mortgage programs, including the Home Affordable Mortgage Program (HAMP), to help homeowners to make meaningful change on their ability to pay their mortgages.  As nearly 25% of the country is underwater on their mortgages and housing prices continue to sag, a great need for assistance exists.

Complaints about the program have been loudly voiced- including homeowners stuck in temporary modifications for several months making timely payments only to be denied a modification in the end; baseless or ambiguous rejections; no response from lenders about applications into the program; paperwork lost.  The list of complaints goes on.

Now, we learn that HAMP may ultimately aid just 700,000 borrowers-much less than the four million homeowners it had aimed to assist.

Moreover, of the more 483,000 permanent mortgage modifications in progress under HAMP, most have increased the unpaid principal balances higher than they were pre-modification.  More than half the trial modifications launched under the program have failed and only 34% of the trial modifications have been made permanent.

In the Road Out of Debt, we walk you through the various steps you can take to deal with your mortgage.  Many require some assistance from your lender.  It appears you will have to work very hard to get your lender on board and that you cannot count on the government programs.  You have to stay strong through the process.

At least this may demonstrate to more people that a bankruptcy judge should have the power to modify mortgages in bankruptcy.

Congress take note.

Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt.