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A year ago, the Obama administration launched the Making Home Affordable program, putting $75 billion toward modifying mortgages and helping millions of borrowers through the worst housing crisis in decades.
So far, the results are slim. About 100,000 Florida loans have been modified on a trial basis. A spokeswoman for the Treasury Department says it is difficult to estimate how many borrowers are eligible.
Fewer than 15,000 trial loan modifications in Florida have become permanent. Nationwide, 116,297 modifications have become permanent out of almost 1.3 million trial modifications begun under the Obama program.
Bankers point out that a mortgage modification is only a temporary break that gives borrowers an affordable payment while they stay in the home. Borrowers, they say, should make plans for the day when that period of lowered payments will end and decide whether they can really afford the house.

A cut in the interest rate, for example, could end in a few years, which would mean the monthly payments would increase and the loan potentially becomes unaffordable again.
Under the Making Home Affordable program, interest rates can be lowered for up to five years. Then they start rising again, 1 percentage point per year until the rate reaches the market rate at the time of the modification. Loans modified outside the federal program can have different provisions.
Another emerging issue is balloon payments. Not all loan modifications have them. But some permanent loan modifications defer payment on a portion of the loan until years later.
When the mortgage’s term ends – in 30 or 40 years – or when the house is sold or the loan is refinanced, some borrowers will owe a one-time, lump-sum payment that could amount to tens of thousands of dollars. The balloon payment covers the portion of the principal that was deferred.

The concept of deferring principal and having a balloon payment is widely misunderstood. A lot of people think (the principal that they’re not paying) is going to be forgiven, when, in reality, it's not.
Homeowners may be unaware of the terms of their new deals – for a good reason. Terms such as balloon payments are not spelled out in their loan papers. It doesn’t say you have to make a balloon payment [in the future]. Unless you know how to work a real estate calculator, you don’t know what you’re signing.
For borrowers trying to hold on to their homes the difficulties continue even after the new loan begins.
About 20 percent of modified loans, through last June, ended up in default only three months later, according to federal statistics.

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