Report: Few Hoosiers using foreclosure prevention program

WASHINGTON — Hoosier homeowners are potentially missing out on the Obama administration's flagship foreclosure prevention program.

Indiana homeowners have used the program to lower their monthly payments at far lower rates than would be expected given the state's foreclosure rate, according to the government's watchdog for the program.

Only seven states have been more underserved by the Home Affordable Modification Program.

Special Inspector General Christy Romero said in her report to Congress that the Treasury Department needs to do more to inform homeowners in the 10 most underserved states about the program.

"Before a homeowner can get help from HAMP, they need to know about HAMP, but these states received the least Treasury outreach," Romero said in a statement.

Several Indiana housing lawyers say the program is not well-known here, and the Treasury Department has conducted only one homeowner outreach event in Indiana.

"I'm not sure how anyone would know about the program or how to apply unless they have Internet access or are directly solicited by their loan servicer," said Chase Haller, an attorney at the Neighborhood Christian Legal Clinic, an agency that helps troubled homeowners.

He said the Treasury Department needs to make more targeted marketing efforts in Indiana, perhaps partnering with the Indiana Housing and Community Development Authority, and help people seek assistance.

Judith Fox, a law professor who specializes in foreclosure law at the University of Notre Dame, said Indiana has a shortage of housing counselors to help distressed homeowners obtain a loan modification.

"It is very hard to go through this process without assistance," she said. "The paperwork is confusing, and correspondence from the lenders is contradictory and not very helpful."

Mark McArdle, chief homeownership preservation officer at the Treasury Department, said the department will review Romero's suggestions. But he said the report did not adequately consider the strategies the department is already using through both national outreach and targeted campaigns in hard-hit areas.

"Treasury employs a sophisticated, multipronged approach, which has been effective in reaching eligible homeowners," McArdle said in a statement.

Nationwide, there have been about four foreclosures for every loan that's been modified by the federal program. In Indiana, there have been nearly eight foreclosures for each loan modification.

As of the end of last year, 17,439 Hoosiers have had their mortgages permanently modified through HAMP.

There have been two paid radio campaigns to advertise the program in Indiana and one event for homeowners, which was attended by 327 people. No homeowner events have been held in six of the 10 states most underserved by the program.

The loan modification program was launched in 2009 to help homeowners avoid foreclosure as housing prices sank and unemployment rose. The government offers incentives to loan servicers to modify mortgages — through changes in the interest rate, length of the loan or adjustments to the principal — to get monthly payments down to about 31 percent of household income. Homeowners must meet certain qualifications, including having received the mortgage before 2009.

The program has struggled to reach the estimated 3 million to 4 million homeowners it was expected to help.

About 1.5 million homeowners have had their mortgages permanently modified, although more than 452,000 of them have fallen out of the program by defaulting.

While congressional Republicans have criticized the program and tried to end it, the application deadline has been extended three times. Homeowners currently have until at least December 2016 to apply.

Romero's report said the Treasury Department has followed only some of her office's recommendations for making the program more effective.

And while there are different reasons why homeowners in some states have used the program more than others, the federal government should be doing all it can to increase outreach and provide counseling for those interested in applying, the report said.

"There is an opportunity for Treasury to do more to reach out to homeowners in these underserved states," Romero said. "It is up to Treasury whether they take that opportunity or continue to keep homeowners in those states underserved by HAMP."

More information about the program is available at www.makinghomeaffordable.gov/ or by calling (888) 995-HOPE (4673).

Maureen Groppe is with the Star Washington Bureau. Email her at mgroppe@gannett.com. Follow her on Twitter: @mgroppe.