Wednesday, December 09, 2009
Quarter of Loan Mods in Default AGAIN
More than 25 percent of homeowners who have received assistance under the administration’s Home Affordable Modification Program (HAMP) have fallen behind on their new payments – a harrowing statistic that has stirred up more doubt about the effectiveness of the government’s $75 billion foreclosure prevention campaign.
Citing data from a Treasury Department survey of the nation’s largest mortgage servicers, Assistant Treasury Secretary Herbert Allison told a congressional oversight panel that only “73 percent of borrowers are current in their trial plan payments,” according to a written Q&A document obtained by Reuters.
The Washington Post also noted that Allison’s comments to the panel included a redefault forecast of 40 percent for HAMP restructurings, which in all actuality would be an improvement over the track record for non-program modifications. Data from the Office of the Comptroller of the Currency shows that 52 percent of mortgage modifications made in early 2008 had become delinquent again after one year.
Converting borrowers from the trial phase to permanent modifications has become HAMP’s latest sticking point. Last week, the administration announced a new push to pressure servicers into converting more trial mods to “permanent” status, threatening to impose fines, withhold incentive payments, and resort to public humiliation of those companies that don’t pick up the pace.
According to DS News’ Washington Bureau, the Treasury summoned representatives from the 10 largest servicers for a closed-door meeting Monday morning, presumably to ensure each is pulling their weight to meet the Department’s year-end deadline for permanent modifications.
The Treasury is expected to release new numbers outlining servicers’ performance under HAMP later this week, but based on the November report, 650,994 trial mods were underway as of the end of October. Administration officials say 375,000 of those are scheduled to convert to permanent modifications by the end of the year, and they’re pressing servicers to get the paperwork moving and ensure this number is met.
Banks say they are working overtime to fulfill the Treasury’s request, but the biggest obstacle is getting borrowers to submit the additional documentation for conversion to permanent status. According to Bloomberg, Bank of America is trying to make 65,000 trial mods permanent by December 31, but roughly 20 percent of those borrowers haven’t returned the paperwork required.
By Carrie Bay DSNews.com