Servicers Incentivized To Modify Loans Under Obama Plan – Is It Enough?


The Obama $75 Billion housing stabilization plan holds pieces which are designed to help stem foreclosures and help those already in foreclosure with loan modifications. Currently servicers have shown no real signs of wanting to modify loans, but this new plan hopes to change their collective minds.

Will the Housing Stabilization Plan Work?

I’ll get to that in a minute…let’s first look at how the plan incentivizes servicers.

The first taxpayer nugget is a $1,000 bonus per modified loan. Then they get another $1,000 incentive payment if the borrower stays current at year end. Servicers will get $500 for modifying loans not currently even in default with a $1500 kicker going back to the lender.

The Obama administration feels this is such a powerful an incentive plan, they made the whole program voluntary.

Yep, you heard me….voluntary.

Do you remember the Bush Administration program to help modify loans…called Hope Now? It was voluntary too and we saw just how well that worked. They modified a handful of loans but skewed the numbers with semantics making it appear more successful adding insult to injury.

Does Obama believe we are as gullible as Bush thought?

I guess so, because he wants us to believe subprime lenders expecting billions in interest payments are going voluntarily fore-go that money for $1500.

That is laughable.

And let’s not forget that these lenders are legally owed that money. They will go after it…it’s their money after all.

Mark my words, the Obama plan on the loan modification side will work about as well as the Bush Hope Now program. Or should I say…NOT work… just as well.

The real goal here, if you ask me, is simply to “kick the can down the road”. Loan modifications are complex and costly. Wholesale loan mods would decimate the already weakened balance sheets of every bank, every Wall Street firm, and all of our foreign investors. And like it or not, these investors still have enough money to lobby…both Congress and the Administration.

Why do you think the plan was made “voluntary” rather than “mandatory”. Bankers’ lobbying dollars at work, in my opinion.

I think the administration is hoping for a housing recovery (and there are signs…so it’s an optimistic but not a stupid view) by mid year. Even a small housing recovery would build real estate market confidence and the foreclosure crisis gets “fixed” by stabilizing home prices.

So, short story, long…they aren’t really serious about keeping foreclosed home owners in their homes.

Big surprise, eh?

Photo Credit: misserion

About Author

Rob K. Blake, a 15 year veteran of the mortgage industry, is a renowned public speaker, author, and former radio talk show host. His blog,, is dedicated to educating mortgage consumers, mortgage providers, and investors about both mortgage and housing markets.


  1. Very interesting stuff – I’ll be totally honests and admit that before reading your blog I was pretty clueless on issues like this. I definately feel more informed and more intelligent after reading this. Thanks, you’ve gained a new reader!

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