While the Obama administration and reporters trumpet the fact that the administration is about a month early in reaching its stated goal of modifying half a million troubled mortgages (an accomplishment worth trumpeting), an important aspect is being ignored: last month, less homeowners accepted offers to modify their loans, according to Treasury Department figures released Thursday.
Though the number of offers extended to eligible homeowners continues to rise, the number of offers accepted actually dropped, according to an analysis of Treasury Department data.
The implications, according to at least one economist, aren't good: homeowners have either lost hope or they're the recipients of terrible advice and just don't trust the Obama administration's $75 billion program.
An administration official confirmed that both are serious challenges.
Since June, when month-specific reports became available, the number of offers extended has increased every month, from 136,560 in June to 186,601 in September. Homeowners were taking advantage of the offers. In June 93,146 homeowners accepted; by August 133,192 homeowners had signed up for the Treasury's plan. But in September, the total dropped to 100,216.
Home Affordable Modification Program
Loan Modification Offers Extended vs Offers Accepted
Source: U.S. Treasury Department
"Servicers are making more offers, but borrowers aren't accepting -- that's a negative sign," says Cristian de Ritis, an economist at Moody's Economy.com. De Ritis speculates that those who declined have "lost hope."
"If they're uncertain about their employment, or feeling insecure about their economic position, they're thinking, 'Do I really want to continue investing in this mortgage?' In order to modify their loan, homeowners need to be certain they can make the payments," he says.
"Everyone is focusing on the cumulative numbers, which is what the government is stressing, but it doesn't speak to the deeper problems," De Ritis continued. "If borrowers are losing confidence, that's a problem."
Much has been written about servicers' apparent stubbornness and incompetence when it comes to modifying home mortgages -- not to mention the reportedly frustrating process of going through a modification program -- but homeowners who are declining offers have already gone through the process. As de Ritis notes, they've already been approved. And that's what makes September's low numbers troubling.
Officials at the Treasury Department have taken notice. The agency is working with behavioral economists to improve outreach to borrowers, the Huffington Post has learned. Troubled homeowners are waiting too long to respond to the administration's Making Home Affordable Program; Treasury officials are trying to get homeowners to join the program sooner after becoming eligible, rather than waiting until they're on the brink of foreclosure. Behavioral economists study the effects of incentives on decision-making.
Also, on Wednesday officials from Treasury met with marketing representatives from the various mortgage servicers to get them to improve awareness among homeowners. There is concern that some borrowers may not trust the promotional materials arriving in their mailboxes, or the calls they're receiving from servicers encouraging them to take part in the administration-led effort.
One problem lies in the fact that homeowners generally distrust their mortgage servicers, especially since the onset of the housing crisis. But now, borrowers are being asked to trust them. Though it can't be an easy transition, mortgage companies did get borrowers to sign up for these loans; maybe they can also convince homeowners to modify them.
Were you recently offered a home loan modification? The Huffington Post wants to hear from you. Please e-mail me your story at shahien [at] huffingtonpost [dot] com.
Note: This post was updated Friday morning to include the graph seen above, and to reflect the fact that there is some lag time between when a servicer extends an offer and when a borrower's modification plan actually begins. Therefore, monthly ratios aren't as useful. Felix Salmon of Reuters breaks it down.
Get HuffPost Business On Facebook and Twitter!
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.