By Tami Luhby, senior writerMay 17, 2010: 1:14 PM ET
NEW YORK (CNNMoney.com) -- The number of troubled homeowners falling out of President Obama's foreclosure rescue plan soared in April.
More than 122,000 borrowers had their trial mortgage modifications canceled in April, bringing the total to 277,640 since the program began about a year ago, according to federal statistics released Monday. Meanwhile, only about 68,000 homeowners were converted from these trials to permanent modifications.
Under the program, known as HAMP, eligible troubled borrowers are put into trial modifications to determine whether they can keep up with the lowered payments and to give loan servicers time to verify income and hardship.
Some 295,348 people have received permanent long-term help under the loan modification plan, but another 3,744 have had their permanent modification canceled.
Modifications are usually canceled if the borrower fails to make the adjusted payments or does not hand in the required income verification paperwork during the trial period.
So far, some 24.6% of trial modifications have become permanent, up from 19.8% a month ago. Some 637,353 troubled borrowers remain in trial modifications, officials said.
New rules on their way
Big changes to the program are coming down the pike in the wake of criticism that the administration must do more to help troubled borrowers.
Starting June 1, homeowners will have to provide all their income verification documents before they are put into trial modifications. This will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance.
Separately, the administration plans to roll out its new program for the unemployed on July 1. Eligible borrowers could enter a forbearance program, which either suspends their monthly payments entirely or reduces them to less than 31% of their pre-tax household income.
Later in the year, two more initiatives will begin. One will encourage servicers to lower loan balances for delinquent borrowers when that is more advantageous to mortgage investors than reducing interest rates.
Principal reduction would be available for eligible borrowers who owe more than 115% of their home's current value. The balance would be forgiven as long as the homeowner makes timely payments for three years.
The other initiative will allow some borrowers who are current on their mortgages but have seen their property values drop to refinance into Federal Housing Administration loans worth no more than 97.75% of their home's price. The program is set to start in the fall.
If the borrower has a second lien, the total mortgage debt could not exceed 115% of the property's value. Homeowners, however, must meet FHA's qualifications and have a credit score of at least 500. Their new monthly payments would be no more than 31% of their monthly income.
Grandpa: The results of this $75 BILLION program have gone beyond a joke to truly being sad. It is sad as not lony have billions of debt been dumped on our kids and grandkids, it has been dumped without any measurable return.
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