A report released by the special inspector general for the Troubled Asset Relief Program called into question the effectiveness of the government's loan modification programs. One of the first programs introduced by the Obama administration was the Home Affordable Modification Program. The Treasury Department spearheaded the HAMP program, which provided $75 billion to help lenders ease the burden on overextended borrowers nationwide and stem the rate of foreclosures in hard hit markets like Florida and California.Banks participating in the HAMP program used the money to reduce monthly payments for at-risk homeowners to no more than 31 percent of their income. Despite these loan modifications, many borrowers have still found themselves in default just a few years later. Those who signed up in the final two quarters of 2009 have default rates of 46 percent and 39 percent, respectively.
One man's recent struggle with a bank shows how complicated loan modifications really can be.