Home Affordable Modification Program Off To Slow Start

Can the government’s Home Affordable Modification Program do enough to stem the flood of foreclosures? HAMP has gotten off to a slow start as foreclosure sales and starts …

Can the government’s Home Affordable Modification Program do enough to stem the flood of foreclosures? HAMP has gotten off to a slow start as foreclosure sales and starts in October outnumbered modifications by more than 4 to 1. See the following article from HousingWire for more on this. 

The mortgage servicing industry completed 271,563 total loan workouts in October, according to Hope Now, the private sector alliance of mortgage servicers, investors, insurers and non-profit counselors.

Workouts included 198,373 repayment plans and 73,190 modifications. At the same time, the industry completed 94,450 foreclosure sales and initiated another 222,107 foreclosure starts.

Total 316,557 foreclosure sales and starts outnumbered modifications more than 4 to 1 and repayment plans about 1.6 to 1. Hope Now attributes some of the slow-down in modifications to the Home Affordable Modification Program (HAMP) sponsored by the US Treasury Department.

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Under HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. Hope Now’s reported modifications have slowed as servicers began implementing HAMP, which requires a three month trial period to ensure borrower affordability of modified payments before a HAMP modification is considered permanent.

Servicers are pursuing HAMP modifications before repayment plans — slowing down reported repayment plans — and have to wait through HAMP trials before reporting permanent modifications — slowing reported modifications. Despite the slow reporting of permanent HAMP modifications, the Treasury has said more than 650,000 trial modifications are underway, putting HAMP on track to reach a target 3m to 4m homeowners in three years.

“Our number one priority is to convert HAMP modifications, but also do our best to help borrowers with all solutions available,” said executive director Faith Schwartz in a statement. “This sometimes means a graceful exit via short sale or deed in lieu if a borrower has no other options.”

Short sales might become more prevalent among servicers, now that Treasury will offer incentives through the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA will complement HAMP by providing financial incentives to servicers, borrowers and investors that go forward with short sales or deeds-in-lieu of foreclosure, according to a Treasury announcement late Monday.

Currently, Hope Now only reports HAMP activity when trial mods become permanent, creating the appearance of a slow start to HAMP. It remains unclear how many trial mods have become permanent, although the Treasury said HAMP is on track to boast 375,000 permanent modifications by year-end.

Hope Now expects to change its reporting of industry workouts soon to account for activities outside of HAMP. More comprehensive reporting of industry efforts would likely begin in Q110.

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.

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