An analysis by the consumer advocates and the industry observers

In-house mortgage modifications by the lenders were ramped up for those who did not qualify for the foreclosure prevention program of President Barack Obama. This was looked upon as a good sign and an ethical move by the lenders, but the irony remains. The homeowners who gained these modifications from the banks now came up redefaulting at double pace than that compared to the HAMP.

11% of those who received modifications under the flagship Home Affordable Modification Program of the government have defaulted and 22% of those who received modifications from the banks' in-house modification programs have actually defaulted. These figures are for the 4th quarter of the year 2009. Experts and regulators have explained why there is this difference in default rates. According to the experts, HAMP reduces the monthly payments of the mortgages by $608 compared to $307 reduction in monthly payments under modification schemes of the banks.

Under further explanations, the experts explain that under HAMP, the monthly mortgage payments for the consumers are reduced by 31% of pre-tax incomes. This is done by keeping in mind that the banks stay in a profitable position by loan modification rather than foreclosure and that the servicers receive incentive from the government for participating in the program. Whereas for the in-house modifications by the banks do not have any guidelines.

An analysis by the consumer advocates and the industry observers, after a close watch on the default rates, reveal that these adjustments are simply temporary fixes to the holes created by the foreclosures and that the home prices will once again head downwards in the consumers redefault again. In-house loan modifications by the lenders are actually leaving behind the HAMP and 44.5% of those who fail to get HAMP aid are winning proprietary modifications from the banks. This is a serious concern for the housing counselors, because there is not enough information about the in-house modification programs from the lenders. Since there are redefaults, it is possible that the already overstocked inventories of repossessed properties will grow and homebuyers will be in a win-win situation.