Many people are now trapped in a home they can’t afford because they went with an adjustable mortgage. An adjustable or ARM makes it so the rate starts off low, but can and will adjust later down the line. This kind of deal seemed very appealing especially to people who were looking to turn around and sell the properties with in a few years before the rates were to adjust.

Harvey Clavon is an example of this. He bought is Santa Clarita, CA home with the intention of selling it a few years later when he retired in Palm Springs. His once affordable payments are no longer easy to make, as his mortgage payments have risen to $2,700 a month because of a clause he did not notice on his contract, and are scheduled to rise above $4,000 in two years. On top of this the value of his home has decreased and the amount he owes has increased because he can only make the minimum payment. As a result many people are finding themselves facing foreclosure.

There was a new record set on the foreclosure front, and it not a good one. The number of filings went up in the month of July. “July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac.

The worst hit areas are still the “Sand States” with California, Nevada, and Arizona being among some of the hardest hit.

Many homeowners have complained of the headaches involved with the loan modification process. Here is a list of reason as to why this process turns in to the long drawn out headache which so many have had to deal with.

1. Fax machines. Often banks and loan modification firms have homeowners send their paperwork via fax. Fax machines have a tendenacy of cutting off documents or skipping pages in long faxes.

2. Mulitple Forms. There are numerous forms involved in processing a loan modification, and the time that it takes to go through these forms not only slow down the homeowners, but also the banks, as they are inundated with these forms.

3. Outdated Documents. By the time banks get to the homeowners paperwork many of their pay stubs and documents are outdated and they need new records, again dragging out the process.

4. Poorly trained personel. As the loan modification business grows many peope are being brought on not having any experience, and with the influx of business there is  little time for actual training.

5.Unclear offers. Many homeowners are receiving offers they do not understand which leaves them unsure if they should move forward with the loan modification.

Needless to say there are many kinks that need to be worked out in this system.

Most banks are up to their eyeballs in foreclosures and subsequently loan modifications, but some are better handling it then others. Bank of America and Wells Fargo were among the worst performers of U.S. Banks in modifying loans. According to the Treasury Department, “Bank of America began 27,985 trial loan modifications, or 4 percent of its eligible loans, under the government’s Making Home Affordable Program started this year.”

The report also shows that, Wells Fargo had a 6 percent rate, following Chase’s 20 percent and Citigroup’s 15 percent. Wachovia Corp., which Wells Fargo acquired, had a rate of 2 percent.

Foreclosures are overwhelming the Government and Loan Modification Counselors. This year lender s have modified more than 235,000 mortgages under the new Obama program, but in the mean time there has been 1.8 million foreclosures in 2009.

There has been a lot of criticism with the Obama housing program, which is understanding considering the circumstances. And although it is slow moving it is still better than the program we had a year ago. Which program you may ask… that is exactly my point.