While launched with much fanfare and outsized expectations, many financial experts are becoming skeptical about the real world success of the Obama Loan Modification plan. Results show not many American have benefited from the program. According to the predictions, the program was to address approximately 3.5 million foreclosures and loan modifications by the end of 2009. However the program helped less than 150,000 applicants for loan adjustment even after five months of its inception. Today it’s estimated over 11 million are eligible with only a small percent of this number being helped. All indications are the plan continues to perform well below expectations.

The federal government acknowledges more needs to be done to make the loan modification plan effective. According to official sources, mortgage service providers and lenders should spend less time with the paperwork and make the rules attractive to suit the loan applicant. There’s concern and frustration regarding how lenders process HASP loan applications. Policy makers are continuing to make revisions to make the program available to more homeowners in distress. Some of the reasons which make the plan less effective are explained briefly:

• The plan has had difficulty motivating loan modification companies, lenders and mortgage companies to hire enough specialized staff to help applicants find answers to their actual debt problems. To date, most incentives have failed to persuade lenders to be aggressive enough.
• While implementing the loan modifications, creditors started recording large losses and appealed to Congress for help. While these negotiations were going on, many felt HASP was tarnished and potential applicants became more skeptical about taking advantage of a loan modification thinking their applications may not be handled properly.
• In May, Congress passed a bill giving the home loans modification services providers more flexibility while providing credit to the individuals applying for a loan. However, most insurance companies failed to comply. This made it difficult for the loan providers since mortgages provide them with protection against loan defaults.
• Experts feel the HASP plan is far more complex than originally thought and it is going to be difficult to effectively implement. Borrowers need to understand the guidelines to benefit from the program. But there are not enough trained personnel to guide applicants.
• According to Nicholas Retsina, director of Harvard’s Joint Center for Housing Studies, HASP is gradually losing its focus in providing the loan change help needed. The market situation keeps on changing dynamically and modifications don’t keep up.
• A major mistake on the part of the Obama administration is the dismissal of all loan modification services offered by private law firms that usually negotiate the loan modifications and provide custom-made solutions. Loan modification can be complex for the debtor and this is where law firms excel.