HAMP Loan Modifications Performing Well

The Julyrnedition of the Obama Administration’s Housing Scorecard was released on Fridayrnand continues to broadcast mixed signals as home prices improved slightly butrncontinued to show strain from foreclosures and distressed mortgages.  The Scorecard, issued jointly byrnthe Departments of Treasury and Housing and Urban Development (HUD) is largelyrna recap of data released by other sources such as the Census Bureau, S&PrnCase-Schiller, RealtyTrac and the National Association of Realtors.  As much of the data reported is quarterly, mostrnof the Scorecard consisted of Quarter One information that we have coveredrnbefore.</p

HUD Assistant Secretary RaphaelrnBostic said, “This month’s housing data paintrna mixed picture of conditions in the market – despite growing evidence ofrnprogress in the broader economy.  We’rerncontinuing to see a slight improvement in home prices and a decline in mortgagerndefaults as our foreclosure prevention programs reach more borrowers upstreamrnin the process. But we have much more work to do to help the market recover andrnto reach the many households there and across the nation who still facerntrouble.”</p

ThernScorecard reports that fewer homeowners fell behind on their mortgages duringrnthe month of June.  During thernmonth 4.4 percent of prime mortgages were 30+ days delinquent compared to 5.9rnpercent at the peak in 2010 while the 30+ delinquencies in subprime mortgages werernat 32.9 percent compared to 36.6 percent at the peak.  Seriously delinquent prime loans were down 22rnpercent from their peak and subprime loans were 12 percent lower.  </p

As usual, the real meat of the Scorecard is the monthlyrnreport on the Making Home Affordable Program (HAMP) which is incorporated inrnthe Scorecard by reference.  HAMP, arnjoint initiative by HUD and Treasury, reported continued improvement in thernprogram’s widely criticized conversion rate. rnSince June 1, 2010 when HAMP changed its procedures and broughtrnincreased pressure on its servicers to speed up and improve theirrnadministration of the program, 74 percent of homeowners eligible for thernprogram have achieved permanent modifications within 3.5 months of entering thernprogram compared to 5.2 months before the changes.  In fact, of the top ten servicersrnadministering the program only two average over 3.5 months and seven are belowrnthat figure.  One West averages 3.7rnmonths from intake to permanent modification and Chase, which has been thernworst performer since the program began, is averaging 4.7 months.  </p

At present there are 23,014 homeowners who have been inrntrial status for six months or more, a quantum improvement over the 165,543 whornwere in that position last June, the point at which HAMP revamped itsrnprocedures.</p

Since the previous HAMP report 24,659 homeowners havernentered the trial modification program and 31,620 trials modifications havernmoved into permanent status.  Since thernprogram began in April 2009 1,639,382 borrowers have started trialrnmodifications, 763,071 have converted to permanent status.  There are now 115,515 trials in process, andrn657,044 borrowers with permanent modifications.</p

These conversions mark a dramatic improvement in the rate sincernthe June 2010 modifications.  Of thernloans entering the program prior to that date 42 percent, converted to permanent modificationsrnand 1percent are pendingrnprocessing or decision.  Of eligible trials started after 6/1/10, 74rnpercent converted to permanent modification and 16 percent are pending processing or decision.  Among the top ten servicers American Home,rnGMAC, SPS, and Wells Fargo are performing above 80 percent while Bank ofrnAmerica and Chase have dismal results at 62 and 66 percent respectively.</p

Permanent modifications are performing well over time.  At six months 93 percent of the modificationsrnare still active with 10.5 percent showing a 60 day or more delinquency.  At the one-year mark, more that 84 percent ofrnhomeowners remain in the program with the 60 day delinquency around 20 percentrnacross all vintages of modifications. rnHistorically, foreclosure prevention programs have had only about a 50rnpercent success rate.  Long term data isrnlimited, but more recent modifications are generally performing much betterrnthan those converted early in the program with fewer going delinquent across everyrntimeline.  As might be expected, performancernis strongly correlated with the size of the payment reduction.  At one year more than 91 percent ofrnhomeowners who received a payment reduction greater than 50 percent remain inrnthe program, exceeding the performance of those with less substantialrnreductions.</p

The report shows a breakdown by servicer of the dispositionrnof troubled loans when the homeowner was not accepted for a HAMP trial.  A large number of these borrowers stillrnreceived assistance or were able to cure their delinquency.  Of 1,558,968 homeowners who were not eligiblernfor HAMP assistance, 24.7 percent have brought their loans current and 26.2rnpercent received an alternative form of modification.  Foreclosures were started and/or completed onrn18.8 percent and 5.3 percent participated in a short sale or gave a deed inrnlieu.  Action is still pending for 14.7rnpercent of these homeowners.  Smallrnnumbers of borrowers are in bankruptcy, paid off their loans, or receivedrnpayment plans.</p

Second liens have been a major stumbling block tornmodification and other foreclosure avoidance initiatives so one year ago HAMPrnstarted a Second Lien Modification Program (2MP) and 33,715 homeowners havernentered that program, most since last December. rnThe program attempts to fully or partially extinguish second liens or tornmodify them so as to make the total debt manageable.  To date, 2,564 liens have been fullyrnextinguished, 1,279 partially extinguished, and 29,584 modified.  The average size of an extinguished loan wasrn$67,371 and partially extinguished debt averaged $6,181.</p

The Housing Scorecard has started spotlighting activitiesrnin one region of the country and this month it is Riverside, California and itsrnsurrounding communities, among the hardest-hit areas after the housingrndownturn. The Housing Scorecard Regional Spotlight features data on the healthrnof the Riverside housing market and impact of efforts to help homeowners at thernlocal level. 

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