According to the U.S. Treasury, of the 728,408 modified loans nationwide as of the end of November 2009, only 31,382 became permanent modifications under the Home Affordable Modification Program, or HAMP. Why are so few applicants receiving permanent loan modifications?

The three significant reasons are:

• Borrowers don’t make the payments during the trial period. Unfortunately, approximately 25% of borrowers who entered the trial period are now back in foreclosure.
• Borrowers don’t submit the proper documentation to prove their income or owner home occupancy by the deadline. Borrowers complain of bureaucracy and prolonged, unhelpful phone calls, while banks complain that borrowers don’t return phone calls or provide the requested, required documentation.
• Finally, borrowers are often found to ineligible for HAMP once they do submit their paperwork. There are many reasons they could be determined ineligible, such as lack of hardship, lack of willingness to keep the home, inability to make the reduced payments.

The process can be a huge hassle for those who apply, and then in the end, the majority of people don’t qualify. Steps are being taken by the Obama administration to make the application process smoother, including holding participating lenders accountable for their role in the process. I haven’t applied for a loan modification myself, but from what I’ve read and heard, there has to be an easier way.

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