It saves distressed borrowers an average of nearly $70,000, but eight months after full implementation, just 16,000 principal reduction modifications are active
In March 2010, the Treasury Department announced the program that foreclosure prevention advocates had been waiting for. Instead of continuing to rely on the common but relatively weak mortgage modification tactics of temporarily reducing borrower interest rates or lengthening loan terms, the new program would reduce the amount of money distresesed homeowners owe. Now 15 months later, we finally have some data on the program's progress. Its success appears to be in potency, but not in reach.
On Friday afternoon, the Treasury revealed that about 16,000 Principal Reduction Alternative (PRA) mortgage modifications are active. Of those, nearly 5,000 have been made permanent.
How big are those numbers? Although the program was announced over a year ago, it has only been fully implemented since last fall. So it's been running at full strength for about eight months. For a little perspective, from October through May approximately 2 million foreclosure actions have been taken, according to RealtyTrac. And that's a period during which foreclosure activity declined substantially, as banks faced issues forcing them to revamp their processes. In this context, 16,000 active trials and 5,000 permanent PRA modifications doesn't sound like much.