Since the housing market collapsed in 2007, the government, banks and mortgage lenders have created hundreds of loan modification programs in an effort to stem the foreclosure crisis and to get the U.S. economy back on track. The Obama administration’s initial mortgage relief programs, launched in early 2009, were intended to prevent 7 million to 9 million home foreclosure. So far, they have been able to extend mortgage help to nearly 2 million, and not all of those are out of risk of a loan default. Many homeowners have struggled to refinance a bad credit mortgage because they don’t have the equity or they are unable to meet the credit score requirements because of delinquent mortgage payment or mounting credit card debt.

Mortgage Modification Programs with Good Intentions

Many of the mortgage loan modification programs that begun later also have faltered. One loan mod program intended to help at least 500,000 has helped just a few hundred a year after its launch. Another initiative to extend $1 billion to help the jobless or underemployed avoid foreclosure ended in September, obligating less than half of its funds. The money that was not distributed had to be returned to the U.S. Treasury.

As of November 30, the government had spent just $2.8 billion of the $46 billion war chest it had in 2009 to devote to the housing crisis, the Treasury Department says. More has been committed, but only $13 billion will ultimately be spent, the non-partisan Congressional Budget Office estimated in March.

The Obama administration announced new guidelines with the HARP 2.0 that promised no Loan to Value restrictions. This home refinance program is only available to underwater borrowers who happen to have a mortgage owned by Fannie Mae or Freddie Mac.

Meanwhile, 2.5 million homes have been lost to foreclosure since 2009, an additional 4 million are in the home foreclosure process or seriously delinquent and home prices are still falling in much of the U.S., shrinking household wealth for millions of Americans. “Every loan modification program has fallen far short of goals. I can’t think of one that’s been largely successful,” says John Dodds, director of the Philadelphia Unemployment Project, a nonprofit that’s been involved in foreclosure prevention for decades.

The Obama administration’s programs were hampered by failed refinance options and loan modification program flaws, their reliance on a home loan industry overwhelmed by the fallout from a historic collapse in home prices and a brutally extended housing downturn. Nor could they always overcome the conflicting interests of borrowers with too much debt, mortgage lenders unwilling to surrender profits and home loan servicers with sometimes greater financial incentives to foreclose on loans.

Loan modification agreements and stalled foreclosures appear to be the current trend with the banks.  Underwater mortgage loans have become a significant issue and that’s why HUD committed 1 billion dollars to the Emergency Homeowner Loan Program. Attorneys general from 49 states have agreed to coordinate efforts to investigate the nation’s foreclosure mess and determine whether servicers violated state laws by cutting corners when filing their paperwork.  Learn more about HUD’s new mortgage relief.

The U.S. government has been working frantically to pass mortgage reform that would require loan modification licensing.  The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks.  John Courson, CEO of the Mortgage Bankers Association said that mandating licenses for mortgage loan modification advisors could slow hiring and hinder efforts to cut home foreclosures.” Courson continued, “We say this is not originating a new home loan, because the loan terms are being reduced on their home mortgage to increase the affordability and reduce the likelihood of a foreclosure.”

The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman.  According to Anthony Hsieh, CEO of LoanDepot.com, an online mortgage originator based in Irvine, California, the process costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system. “The mortgage reform law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite, keeping the good loan officers out.”