Sunday, March 14, 2010
In reading through some of the commentary about Friday's report(.pdf) containing the latest data for the government's Home Affordable Modification Program (HAMP), the item circled in red below sort of "popped out at me" as being one of the more important reasons why this program will, ultimately, be an even bigger failure than it already is.
Even after mortgage payments were reduced to a maximum of 31 percent of gross monthly income, the median total debt service each month is almost twice that amount, which almost guarantees a high rate of default down the road.
Based on the note above, it seems there is no upper limit on the back-end debt-to-income ratio and borrowers coming in at above 55 percent are required to seek counseling, but, apparently, this doesn't stop their loan mod from becoming "permanent".
Whatever happened to 28 and 42 percent for front-end and back-end debt-to-income ratios?
How can these people possibly last when they have to start with just 40 percent of their income to pay taxes and then take what's left over to put food on the table, put gas in the car, pay their medical bills, pay their utility bills, and the many other costs of everyday life?