Home Affordable Modification Program |

Home Affordable Modification Program may give homeowners some financial relief. Even if their debts are skyrocketing, they may not have to resort to the high interest rates that come with debt consolidation loans. That’s because Wells Fargo has joined Bank of America in announcing that they will modify the home-equity loans of consumers who have already qualified for assistance from the U.S. Treasury Department’s Home Affordable Modification Program. This is a big deal because combined, Wells Fargo and Bank of America service 25 percent of the second mortgage loans in the United States.

An Alternative to Debt Consolidation

Homeowners struggling to pay their first mortgage loans can now request a loan modification through the Home Affordable Modification Program. Under this program, lenders and banks are given financial incentives from the federal government to lower the monthly mortgage payments of struggling homeowners. The goal is to reduce interest rates, forgive portions of loans’ principal balances or restructure their terms to somehow lower the amount of money homeowners must pay each month.

But what happens to those homeowners who have their first mortgages modified but are now having trouble paying their second mortgages or home equity loans? Well, if they are customers of Bank of America or Wells Fargo, they, too, can petition to have that loan modified. This, of course, is an alternative to debt consolidation: Rather than take a debt consolidation loan to handle their home equity and credit card payments, consumers can have their second loan modified. It might save them enough money to pay down their escalating credit card debt, too, without the help of a debt consolidation loan.

Will Others Follow?

The Obama administration would like to see other banks and lenders follow the lead of Wells Fargo and Bank of America. Administration officials have made no secret of the fact that they’re not happy with the progress banks and lenders have made under the Home Affordable Modification Program. According to the latest numbers from the U.S. Treasury Department, 170,000 homeowners had received mortgage modifications through the end of February, 2010. The department also reported that 91,800 additional loan modifications had been completed, but were only waiting for the final OK from homeowners. There’s little doubt that a loan modification is a superior alternative to debt consolidation loans. These loans are a necessity for consumers in fiscal emergencies. But they are far from ideal. They come with high interest rates and origination fees. But if there is no alternative, consumers will continue to rely on them, especially in this difficult economy.