The underwhelming success of HAMP was underscored by a Congressional Oversight Panel prediction of 50 percent failure rate, meaning a quarter million permanent modifications will end in redefault. But the panel also heard a defense of the criticized housing rescue program, claiming modifications are now on track and are changing the industry’s loss mitigation approach. See the following article from HousingWire for more on this.
Half of the so far nearly 500,000 permanent modifications completed by servicers participating in the Home Affordable Modification Program will redefault, Sen. Ted Kaufman (D-Del.), chairman of the Congressional Oversight Panel said Wednesday.
Since the HAMP launched in March 2009, servicers have completed 495,898 permanent modifications, and extended 1.6 million trials. So far, the Treasury has committed nearly $30 billion to the servicers for a program that was initially estimated to cost $50 billion.
Servicers are paid $1,000 for every permanent modifications and another $1,000 every year the new loan is current.
“To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lose their homes,” Kaufman said, a view in line with the Special Inspector for the Troubled Asset Relief Program that said earlier in the week that TARP has let down many homeowners.
Phyllis Caldwell, chief of the homeownership preservation office at the Treasury, said in written testimony before the panel that servicers are meeting the internal goal set by her office of 20,000 to 25,000 approved and started modifications weekly.
Of all mortgages that had been converted into a permanent modification, 15.6% fell into 60-plus day delinquency within nine months of the conversion, and 11% fell into 90-plus day delinquency. After six months of the conversion, 9.8% had gone into 60-plus day delinquency, and 5.5% into 90-plus, according to the latest HAMP report.
Caldwell said she expects HAMP modifications to perform better than historical averages, where 60% to 75% of modifications redefaulted.
While Caldwell did admit permanent modifications have been below expectations she said the Treasury has developed other programs to catch borrowers who fall out of HAMP such as the Home Affordable Foreclosure Alternatives program that provides short sales or deeds-in-lieu.
But she also pointed to the way Making Home Affordable has standardized these loss mitigation techniques for the entire industry.
“Taking into account MHA’s effect on standardizing and expanding proprietary modifications in the mortgage industry, the number of mortgage modifications has been double the number of foreclosure completions,” Caldwell said.
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